Q: A church member allows us to park our buses at his business. We used to pay $200 a month for this service. In the past, we have given this church member a letter indicating a donation of $2,400 per year, which he could use as a charitable contribution. Our question is, “What is the proper method to handle this?”
Are Donated Services Tax Deductible?
The IRS does not allow the deduction of donated services as a charitable contribution, even if they provide significant value to the recipient. In this case, the use of parking spaces falls under the category of donated services. As a result, the church member cannot claim a tax deduction for the parking space offered to the church.
How Should Churches Acknowledge Donated Services?
While the donation of services is not tax deductible, churches can express their gratitude in other ways:
- Provide a thank-you letter acknowledging the contribution of parking space.
- Avoid stating any monetary value or suggesting it qualifies as a charitable deduction.
What Should the Thank-You Letter Include?
The thank-you letter should follow these guidelines:
- Express gratitude for the use of the parking space.
- Acknowledge the church member’s generosity without assigning a dollar amount.
- Clarify that no goods or services were exchanged for the contribution.
Why Is This Important?
Providing clear documentation helps avoid any misunderstandings about the tax deductibility of services. It also ensures the church operates within IRS guidelines for charitable contributions.
Learn More About Charitable Contributions
For additional information about charitable contributions and compliance, see Chapter 8 of Richard Hammar’s Church & Clergy Tax Guide.
FAQ: Donated Parking Space
Can the donor receive any form of compensation? Any compensation provided would disqualify the act as a donation and may create taxable income for the donor.
Can services be claimed as a tax deduction? No, donated services, including the use of parking spaces, are not tax deductible.
What if the donor estimates a fair market value? Even with an estimate, services cannot be deducted as charitable contributions under IRS rules.
Should the church issue a receipt for donated services? No, instead, issue a thank-you letter without assigning monetary value.
