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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I am thinking about starting a non profit org for that lack

Resolved Question:

I am thinking about starting a "non profit org" for that lack of a better term in which I provide services, in this case photography, and the money that is earned is dontated to a true non profit organization. Ideally, I would like the client to be able to choose the charity and I would like the "earnings" to be tax deductable to them if at all possible.

So to be clear, let me explain the process that I envisage: I take photos for a client, let's says a portrait of their family. I put their images on a website and they order them for a marked-up price, but still less than fair market value. I pay for the photos to be developed, and mail them their images. I deduct the costs just mentioned, and forward the rest of the money to a charity, preferably their Church. They get a statement showing the amount sent to their charity that they can deduct.

I of course do not want this to be considered income, and have to pay taxes on it since I'm not actually earning any money for myself.
Submitted: 6 years ago via RocketLawyer.
Category: Tax
Expert:  Merlo replied 6 years ago.

Hello JA Customer,


What you are proposing would not work the way you want it to.


First, the client who purchases your services would not be allowed to claim a tax deduction for the money he paid to you for the photos and which you then paid to his designated church or other charity. A taxpayer may only claim a deduction for charitable contributions they make directly themselves to a charity and cannot claim deductions made by a third party in their name.


Second, there is no way for you to get around reporting the money you are paid for these photos as taxable income. It would be considered taxable income to you. If you turn around and deduct your actual costs involved and if you give the rest of the money to a qualified charity, then it would reduce your taxable income, but even then you are limited. You can of course deduct the full amount of your actual costs for the photos to be developed, etc. But you are limited to only claiming charitable contributions which do not exceed 50% of your adjusted gross income. So even if you gave away all of your profits, you could not claim a charitable deduction for all of them and would still end up paying taxes on at least half of your income from this photo business.


About the only way you could accomplish your goals is to have your customers pay you directly for the cost of the photo developing which would then zero out your taxable income as your expenses would cover the income you receive. At the same time have your client provide you with a receipt showing that he donated the money to a qualified charity. That way the client gets to claim a tax deduction for the donation and you are then not obligated to report that as taxable income.


If this was helpful please press the Accept button.


Thank you JA Customer



Edited by Merlo on 6/2/2010 at 11:55 PM EST
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