Of all the reasons to Give One Get One with One Laptop Per Child, did you base your OLPC participation on the G1G1 tax deduction?
For participants in the G1G1 initiative, to the extent your payment exceeds the fair market value of the XO laptop(s) you receive, you may be able to claim a charitable contribution deduction against your U.S.-source income. OLPC Foundation estimates that the fair market value of an XO laptop is $199.While that was the least of the benefits for most geeks, apparently David DeJean is all about it:
Of the $399, you get credit for a $200 charitable contribution. Next April you can deduct that from your taxable income. If your tax rate is, say, 20%, that's a savings of $40, which brings the actual price of the XO laptop you receive down to $183.95. You even get a nice email from Nicholas Negroponte, founder of OLPC, thanking you for your contribution.But before you start to itemize your 2007 tax deductions, you might want to think a little bit deeper about the fair market value of a G1G1 laptop purchase.
See, that cool complimentary year of T-Mobile Hot Spot subscription is valued at more than $350, and that may interest the IRS. As Jeff Trexler points out, while your G1G1 donation is only for laptops and T-Mobile is giving out wifi at no cost to OLPC, the IRS has clear rules about donor benefits:
The pertinent factor is the consideration received by the purchaser, not the cost of the item to the charity.So before you get too excited about knocking off ~40$ from your taxes, be sure to consult with trusted tax and legal advisers concerning your specific G1G1 tax deductibility.Further weakening the exclusion: the OLPC website presents the computers + hotspot as a unified transaction--it's not just something T-Mobile is offering independently off-site, say, if you bring in a receipt. Let's face it--since the price of the OLPC laptop is normally $199 anyway, the only tangible financial incentive to take advantage of the promotion is the free wireless.
I will not be able to use this free wireless benefit. As a result it had zero consideration in my purchase. That company does not offer coverage in North Pole, Alaska. It would be extremely lame if the IRS forced us to count that anyhow.
Re DeJean's remark: "You even get a nice email from Nicholas Negroponte, founder of OLPC, thanking you for your contribution."
Sorry, I've gotten NO such email, and frankly I'm rather annoyed about that!
I am lucky. I got another email from Nick today.
You are receiving this email because you signed up for a reminder about One Laptop per Child's "Give One Get One" Program. There is just one week left to participate. For a donation of just $399 ($200 of which is tax-deductible), you will be giving the gift of education to a deserving child in the developing world, and also receiving an XO laptop in recognition of your donation. Once "Give One Get One" ends, the XO laptop will no longer be available to the general public.
T-Mobile is generously offering everyone who participates in "Give One Get One" one year of complimentary access to T-Mobile HotSpot broadband Internet service, available at more than 8,500 locations throughout the United States. This complimentary year of service is valued at over $350! Just use any Wi-Fi enabled device, such as the XO, your laptop computer, or a Wi-Fi enabled mobile phone, and you can connect and communicate your way.
Lylah,
Sorry to disappoint, but the IRS is clear about situations like yours too. If you follow the IRS ruling link, you'll find that they don't care if you can use the item or not, its still not deductible:
"Also, the mere fact that tickets or other privileges are not utilized does not entitle the patron to any greater charitable contribution deduction than would otherwise be allowable. The test of deductibility is not whether the right to admission or privileges is exercised but whether the right was accepted or rejected by the taxpayer."
So if you want the full deduction, it looks like you'll have to donate the $200 directly to OLPC, not as part of a G1G1 XO purchase.
Frank:
I understand your frustration and annoyance about not receiving the Nicholas Negroponte email - I was in the same place after I placed my G1G1 order on the 15th, but I did finally receive the message today (the 20th).
Some of us went into this without the expectation of an income tax deduction. For example, I live in Canada and do not have any U.S. income. In other cases, a person's income may be so low that the deduction would result in a zero (or negligible) refund.
C'est le vie.
Perhaps the best way to have serious discussions is by using a forum?
http://fyx.us/
why don't you just shut the f up? do you work for the IRS, or something?
what a little toadie you are.
i encourage everyone to take the $200 deduction. then, we can report back here, and mr. goody-goody can narc us out to the feds.
what fun!
Some of the articles I have read here claim that the price of the XO will eventually hit around ~$50. What is considered "fair market"? If the costs will drop, does that mean the contribution amount will go up?
Also, since many places offer free hotspot access. Does that mean that just because you decide to use a premium carrier, that the value is what the premium carrier charges? Since the access is not limited to the XO, is it akin to the free service that some businesses provide?
Please let's keep this discussion civil. There's no need to swear or call people names for their opinions. Wayan was trying to help someone avoid an IRS tax audit. None of us wants a tax audit.
I have no desire to take the tax deduction. Too much work for too little reward.
-vc
John,
The IRS deduction is calculated on the fair market value at the time of purchase, else people would claim 100% for tickets to events, which are worthless the day after.
And thanks Vicky. The other commenter may not realize that I will be asking my tax adviser (called Turbo Tax) if I can take the $200 deduction. I have no desire to rat anyone out, just hoping to enlighten folks on what the ramifications might be of taking the deduction.
Fact of the matter is Americans can get the OLPC for $159.95 plus shipping according to http://www.informationweek.com/blog/main/archives/2007/11/pssst_wanna_57.html
And having to substract T-mobile, Sim City or whatever else was donated by other coorporations is nonsense.
Or else OLPC would never had been able to register itself as a 501(c)(3) tax-exempt organization. It says clearly on laptopgiving.org that "$200 of your donation is tax-deductible". And follow instructions at http://www.informationweek.com/blog/main/archives/2007/11/pssst_wanna_57.html if you work at a company that will match your donation, thus the OLPC is yours for $159.95 plus shipping.
Charbax,
Next time, please read the post before you comment. Then, you'll note that the post goes into detail about the very link you comment on.
As to your overall point, the IRS is very interested in the full package of services that come with any gift received due to a donation to a 501(c)(3) corporation. In addition, its the IRS, not OLPC or InfoWeek, that has the final say on what is tax-deductible or not. A fact every American knows on April 15.
I just don't buy it. The T-Mobile thing is a shaky, limited benefit. If I live in an area with no T-Mobile service, or already have a full T-Mobile subscription, then the value I receive for my donation is still only the cost of the XO laptop. I receive nothing from T-Mobile, I say, "no thank you, don't want that gift," and it's just like me saying "no thank you" to the free Mug that NPR wants to give me for my donation. End of story, I donate $400 and get a $200 gift. Overthinking this is a bit much. I'm probably going to refuse the T-Mobile gift and not use it. The end.
Wayan,
I was always under the impression that the depreciation of certain items can be factored into taxes. I agree that tickets are "perishable", but a laptop isn't. Also, do you have an opinion as to the T-mobile service?
John,
If you donate an asset to a nonprofit (a car for example), the depreciation of that asset is figured into your donation to arrive at its fair market/taxable value at the time of donation. But there is no depreciation of a gift you receive in conjunction with a donation. Its the fair market value at time of receipt.
Douglas,
You bring up an interesting point. If you refuse the NPR mug is your donation value for the IRS greater? Could you do the same with T-Mobile?
I don't know the IRS answer to that but I will ask a CPA friend of mine on Monday. If you have tax-wise friends, ask their opinion too. Let's get to the bottom of this asap.
No FUD necessary!
Participating in G1G1 does not sign you up for T-Mobile, and the mere presence of "free offers" does not obligate you to accept them as consideration.
Contrary to the referenced source article, the offer is NOT represented as a "unified transaction" - this assertion strikes me as either sloppy or disingenuous. There is a link, offsite, to a separate and additional step to actually accept the offer from T-Mobile on their own web site. Check it out for yourself at http://www.laptopgiving.org/en/give-one-get-one.php
Moreover, it is done in a way that can be audited (by keeping track of the transaction "PIN") so that the OLPC buyer can demonstrate that they did not accept the offer from T-Mobile. This clearly satisfies the "test of deductibility" (from the IRS document) as a rejection of the right to the privilege being offered. You pass go and can deduct $199.
Clearly, if the T-Mobile offer is accepted, then the $350 value of that service becomes a consideration received by the gift giver, usable or not, which would more than offset the gift value of $199, and no deduction can be taken.
I Am Not A [whatever], but this is deducible from the original post and referenced source material.
Brilliant! Why take the tax deduction now? That's only worth $40. Better to sell the T-Mobile subscription for $300, making your effective XO price a magical $100 per laptop!
Seems to me that if the T-Mobile access offer is worth $350 at fair market value and is transferable, then I agree... why not sell the privilege of service.
My guess is that it is not transferable, and even if it was, the FMV is inflated. I've seen the laptops going on eBay for $200... but I've not seen T-Mobile Wi-Fi 1-year trials there.
It is not like a theater ticket 'unutilized' which can be sold at market if done so in good faith. If you cannot sell the T-Mobile on the fair market, it has zero value.
Unless I use the T-Mobile service, which I don't expect to, I plan to deduct $200 of my G1G1 contribution.
P.S. The NPR mug might be worth $0.50 at a yard sale!
Any updates on this? Is anyone claiming the $199 deduction? I haven't been given the T-Mobile hotspot info so I actually wasn't given that as a gift but the IRS may argue with that.