Deducting Free Services

Today TaxMama hears from Jenna in the TaxQuips Forum, who needs help. “I work as a cosmetologist.  I am considered self-employed and rent a chair in a local salon.  I give free haircuts throughout the year during my normal business hours.  Could these haircuts be tax deductible?  If so, would they be considered advertisement or gifts?  A colleague of mine has been going to H & R Block for years and they consider it to be an advertisement, but I want to make sure I am legit.”

Dear Jenna,

Now that’s a bit disturbing. How DOES H&R Block come up with an amount for the deduction? And what office is that? I’d like to report them to their corporate office.

Sorry, Jenna, you cannot take a deduction for an expense when you don’t pay any money. You can’t say, I normally charge $50 for a haircut and give away 100 of them a year – so I’ll take a deduction for $5,000.

If you do, you first have to pick up that $5,000 in income – then deduct it, so your net benefit is ZERO!

 Of course, you may deduct the cost of your advertising to promote the free haircuts. You may deduct the scissors, combs, razors, broom, etc. that you wear out faster by giving these haircuts. Alas, you cannot deduct the cost of the haircuts.  

Do you understand the concept? It’s just volunteering – your time may be worth $500 per hour. And you volunteer in your valuable, professional capacity. But you don’t get to take a deduction for the value of your volunteer HOURS – just for your out-of-pocket expenses related to volunteering.

 And remember, you can find answers to all kinds of questions about business expenses and other tax issues, free. Where? Where else? At

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