Can I deduct my client's charitable gift in lieu of payment?

by Mitchell Freedman, CPA/PFS

I am charging a client $200 for a job, but rather than having them send me the money, I want them to send a check in that amount to a charity I designate. Must I therefore declare that money as income? Can I take a tax deduction for the donation?

Individual taxpayers are on the cash basis, so they report income and pay any taxes due on it when they actually receive the money. In this case you are not receiving any cash nor any benefit from the charity, so you do not have any income to report. On the other hand, in order to obtain a charitable deduction an individual must actually make the payment. In this case, you are not making the payment, so you are not entitled to deduct the amount as a charitable contribution.

As your client is making the payment, she would be entitled to the charitable deduction if she otherwise qualifies for it. In order to qualify for a charitable contributions deduction, the payer must itemize deductions. If she uses the standard deduction rather than itemizing, then she doesn't get the charitable contribution deduction.

Mitchell Freedman, CPA/PFS, is the owner of MFAC Financial Advisors, Westlake Village, California. You can reach him at (818) 905-0321.

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