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Pro Bono Services and Donated Use of Space

Last modified: September 1, 2021
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Overview

The value of time or services provided by an individual or company, as well as the donated use of space, is not tax deductible as a charitable contribution.

At the Foundation Group, we hear many instances of volunteers providing their services pro bono, or landlords donating use of their property and wanting to claim the value as a charitable deduction on their taxes. However, the value of a person’s time or the use of space cannot be quantified for such a charitable deduction. 

Examples

Example 1.

A property management company rents units at $600 per month. In needing to secure a location, an organization reaches out to the company to see if they would be willing to donate use of space to a 501(c)(3) organization. One may assume that the property management company could deduct the $600 per month as a charitable contribution. However, that is not the case. The value of the space has been determined by the property management company. That is a fee they charge as a for-profit entity to recoup their expenses and make a profit. However, the value of the space is subjective. It is not tangible. The space simply exists. What is tangible (and may be considered deductible) are the costs of utilities. If expenses are incurred by the tax exempt organization in the facility, and the property management company will cover those expenses such as gas, electricity, and water, those amounts may be deductible by the company as they are actual costs incurred in providing the space to the organization.

Example 2.

An organization needs assistance in developing their website. A website developer offers to assist the organization pro bono. The developer spends hours of time developing the website with content and writing code. There is no charge to the organization for such services. The developer is not able to deduct their standard hourly fee as a charitable contribution as the value of the time is subjective and cannot be quantified for a charitable deduction. That said, if the developer incurred actual costs while volunteering their time, such expenses could be deducted as a charitable contribution. A letter or receipt from the organization demonstrating the volunteer service and expense incurred should be provided for deductibility purposes.

Example 3.

An organization holds a silent auction at a fundraiser. It obtains donations of goods and services to be auctioned. A local spa offers a package for the auction of the services it provides. Because the package of services is not a tangible item, and therefore cannot be independently appraised, there is no ability to deduct the value of the package donated to the 501(c)(3) to auction. It is still appropriate to thank such donors for the services they are providing, and for how their gift will further support your organization’s mission.

Conclusion:

We want to encourage contributions, donations, and support of all kinds given to a nonprofit organization. In-kind giving of donated services and space is certainly one way people can give to help your organization be successful. We just want you to be aware that not everything qualifies for a tax deduction for the donor. It is good to be informed. See our resources below for help.

Resource

IRS Publication 526: Charitable Contributions

How to Categorize Donations

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