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Is it legal to give a free item to donors and have them claim a tax deduction?

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Is it legal to give a free item to donors and have them claim a tax deduction?

Twice a year our 501(c)(3) charity publishes a newsletter for which we charge recipients. Is it illegal to give the newsletter (for free) to individuals who donate to our organization with the understanding that they will claim their donation as a tax deduction?

It is certainly not illegal to give a newsletter or other goods or services in return for a contribution, but in most cases the donor must reduce the amount of the payment claimed as a charitable contribution deduction by the value of the goods or services received in return. If the charity receives a payment of more than $75, it is required by law to notify the donor of the value of the goods or services which is not deductible. (See Ready Reference Page: “Charities Must Set Value on 'Quid Pro Quo' Gifts.”) Most charity newsletters are not sold to the public and are not deemed of commercial value that would reduce the amount of the deduction. But if you sell your newsletter for a specific price, the IRS views the transaction as part non-deductible sale and part deductible gift.

Thursday, September 4, 2008

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