How do I account for donation of retail items for ...

archer · ‎04-11-2018

How do I account for donation of retail items for local h.s.choir auction? I remember seeing something for this but now I can’t find it. Looking for an easy way to hand it to my cpa next year. Ty 🙋🏻

ACAcatering · ‎04-11-2018

Here's a part of a reply I gave on another thread:
"...The best answer is to ask your CPA, but I can tell you how it works with us. Because you aren't "technically" giving any form of monetary donation, there isn't anything to write off. You are basically giving your goods and services which works itself into your tax return because you aren't taking a payment for said goods and services. For example, say you purchase your goods to sell, don't take any money for those goods, but donate them instead. You still spent the money, but it you get nothing back for it. That number will come out of your gross income at the end of the year. Generally, you will owe Uncle Sam a little less."

DaoDeJing · ‎04-11-2018

Good summary.

In other words, you can write off the purchase price you paid for the goods as a business expense when you donate them. Whereas normally you couldn’t write off the Cost of Goods Sold until the item had been sold.

ACAcatering · ‎04-11-2018

There's really nothing to make note of. It writes itself off because you didn't take any money in, therefore it goes against your gross income.

ACAcatering · ‎04-11-2018

But yes, you're right.

DaoDeJing · ‎04-11-2018

Yes, good point. You don’t necessarily have to make note of the value, as the lower value of your inventory will automatically give a cost of goods deduction at tax time.

I like to put such things in my books throughout the year as they occur though, to reduce my quarterly estimated tax payments. I don’t like giving Uncle Sam a free loan. 😊

I just need to make sure not to use both these deductions and the inventory method together during tax time though. Double-dipping on my deductions is probably frowned upon...