By John Stylianou, Accountant
This is the season when we’re often asked to buy tickets for charity events. The tickets are usually priced a little above market value because the proceeds are for a good cause. If you attend, what sort of tax write-off can you take? And what happens if you can’t attend but buy a ticket anyway? Here’s how the tax deduction works.
An example. Let’s say you buy two tickets to a charity benefit dinner, priced at $60 each. You can take a charitable deduction for the difference between what you paid and the fair value of the dinner. (That assumes you itemize deductions and the charity is a qualified organization.) So if the fair value of the dinner event is $25, you can deduct $35 per ticket, the difference between the $60 you paid and the $25 value of the dinner you’re receiving.
How do you find the fair value of what you receive? Sometimes your ticket will tell you, sometimes you can call the organization to find out, and sometimes you have to make a reasonable estimate.
What happens if you find out at the last minute that you can’t attend? Your deduction is still limited to $35 for each ticket, not the $60 you paid. That might not seem fair, but that’s the IRS rule.
There is an exception, however. If you return your tickets to the organization before the dinner takes place, you can deduct the full amount you paid, $60 per ticket. The theory is that if you return the tickets, the organization can resell them to someone else.
So if you can’t use those tickets, be sure to return them promptly if you hope to claim the full deduction.