Non profit organizations that raise funds through events need to let attendees know the dollar amount of the event ticket that is tax deductible for IRS income tax reporting purposes.
Deciding what this amount should be can be a taxing problem (pardon the pun) for many groups, as the following question illustrates:
Where can I find out which portion of an event ticket is tax deductible?
The part that always comes into question is what part of a benefit dinner is “goods and services”? The cost of the food, but not the cost of the wait staff? The rentals? The band that is provided? The things in the goody bag?
I have asked several fundraisers and they all have different views. Accountants want to be very vague and say that this is a judgment call on the part of the charity, but there must be some sort of standard reasoning for these decisions. If you have anything, please let me know.
Sue Sanderson
Waterkeeper Alliance
This is a great question. Perhaps your group has struggled with similar questions as Sue. Let’s take a look at two related issues, first the face value of the ticket and second the tax deductible portion.
Face Value – Ticket Prices
Some organizations base the ticket price on the actual expenses of the event and markup the price just enough as is necessary. A lower ticket price may help raise attendance and may be necessary for some types of events. For example, an outdoor arts festival would naturally be very limited on what could be charged at the gate.
Other types of events have much more latitude on the event ticket prices. Gala events vary greatly in prices from $50 per person to in the thousands. It all depends on what type of event your supporters want to attend and what they are willing to pay.
Tax Deductible Portion of the Ticket
Legal regulations state that donors may only claim a charitable contribution as an income tax deduction when there is nothing of value received in return. When there is some kind of thank you gift or event, the tax deductible amount is that which is left after taking into consideration the value of the gift or event.
First you must determine what the IRS calls the “fair market value” of the event itself, which is normally less than the ticket price.
There are several methods for calculating this. One of the most frequently used is comparison.
Consider what would the cost would be for a similar event if it were not a fundraiser. For example, if a person were to purchase a similar meal at a restaurant of similar status, what would be an average price that they would pay?
For example, you might determine that a semi-formal dinner may have a fair market value of $20 on a $50 ticket. In this case the tax deductible portion is $30.
By using this comparision method, you are in essence taking into consideration the expenses of your event, but also putting those expenses in perspective.
NPO Responsibility
For all tickets $75 and over the NPO must furnish the donor a disclosure statement regarding the tax deductible portion of the donation. However, you may also provide this information for lower amounts as it is helpful to your supporters.
It is the organization’s responsibility to use one of the methods described by the IRS to determine the fair market value of the event and the corresponding tax deductible amount. Anytime you are planning an event it’s good to double check the IRS website to make sure you have the most current information.
Spirit of Fairness
The keyword to remember when deciding on the fair market value is reasonable.
Would it be reasonable to expect a meal that included a salad, vegetable, filet mignon, and gourmet dessert to cost $5 if purchased at a restaurant? Probably not. 😉
But an organization that was holding such a meal could could get a menu or price list from a restaurant in thier area that would provide a similar dining experience and decide on the fair market amount by using this comparison.
The fair market value could vary by several dollars and any amount within a reasonable range would be acceptable for government reporting purposes.
The key point is that the organization is making a fair judgment in an ethical manner and not trying to overinflate the tax deductible amount. As long as your group decides these amounts within a spirit of honesty and common sense, you will be fine.
Related Resources
Be sure to read the IRS resources that address this topic:
Disclosure and Substantiation Rules – (pdf) Good Faith Estimate and Fair Market Value starts on Page 9.
There are also several pages on the Guidestar website with valuable information about events & legal issues:
Raising Money Through Special Events
May 15th, 2012 at 11:45 pm
If someone buys a ticket to a charity event in order that someone who cannot afford to attend may go in his stead, is his deduction still reduced by the fair value of the meal served at the event even though he was not there to partake of it? Similarly, if someone buys a whole table – say 10 tickets – but only sits in one seat, does he get a full deduction for the nine tickets whose meal he did not partake? Thanks!
July 24th, 2012 at 5:06 pm
You’ve addressed the answer of the value of the meal, but is it an obligation of the organization to add to that the services of the DJ and goods that come in the goodie bag (also raised in Sue’s original question). I know that the Academy Awards ran into this issue, but the IRS has developed special regulations for their events. Does that translate to other nonprofits?
September 8th, 2014 at 4:24 pm
I’m trying to determine the FMV for an event that has the following components: $44 per plate for 10 at a table, parking $12, and a Hollywood star guest speaker in which we will expend $25,000 for. Their will be 250 people attending the event. Your help is greatly appreciated.
Thank you,
April 25th, 2016 at 1:43 pm
What if all the food and wine is donated at no cost to the organization, and all event expenses are underwritten? In other words, 100% of the ticket price is going to the organization, not to cover expenses of the event. Is the ticket price 100% deductible?
September 13th, 2016 at 5:07 am
A charity is holding a golf tournament. A person buys a foursome in the tournament but does not play in the event. He finds several other friends to play. Can he take the full amount of the deduction for his purchase of the team, since he derived no value from the event. Further if he did play could he deduct his expenses (i.e. green fee) as his only reward for the donation since his friends made no contribution.
November 14th, 2016 at 6:23 pm
If someone buys a ticket to a charity event in order that someone who cannot afford to attend may go in his stead, is his deduction still reduced by the fair value of the meal served at the event even though he was not there to partake of it? Similarly, if someone buys a whole table – say 10 tickets – but only sits in one seat, does he get a full deduction for the nine tickets whose meal he did not partake? Thanks
February 7th, 2017 at 4:13 am
We are hosting a musical concert. Our tickets indicate an amount of donation, i.e. $5 in advance, $7.50 at the door, $2 for students with ID. Since the clients will not be taking home anything substantial from the concert other than the music which we’re playing and the printed program which we’re providing, wouldn’t the entire donation on the ticket be tax deductible?
December 2nd, 2017 at 1:48 am
We are giving a fundraiser with dinner, music, Drinks and a band. Tickets are 100.00. We are nonprofit. We also have sponsors that pay 1200.00 for a table of 8. How do I figure the tax deduction portion.