Tax Planning: Raffle Tickets as Charitable Deductions

By JC Leahy, MA Acccounting
TaxHelpWhenYouNeedIt.com
Income Tax Preparation & Consulting
jcleahy@taxhelpwhenyouneedit.com

JC Leahy

Question from James in Silver Spring, Maryland: 

If I buy raffle tickets from a charitable or educational organization, how much is deductible on my income tax return?  For example, what if I buy a raffle ticket from my child's school?  How much of that is deductible as a charitable contribution?

Answer:

The general rule is that if you give something to a tax exempt organization and receive something in return, you must subtract the value of what you received, to determine the amount of your charitable contribution. For example, if you give a charity $10 for a box of candy which normally sells for $8, then only $2 is deductible as a charitable contribution: $10 minus $8.  In the case of a raffle ticket, when you buy the ticket, you get something in return - a chance to win the prize. In the IRS's eyes, the value of the CHANCE to win the prize is always WORTH THE  PRICE  you pay for the raffle ticket; therefore, NOTHING  is deductible. So if you buy a $10 raffle ticket from you child's school, zero is deductible: $10 minus $10 equals zero.

The exception occurs if you pay money to a tax exempt organization and then get a raffle ticket free. For example, you might pay $200 regular annual dues to a tax exempt organization and the organization might send you a raffle ticket free of charge. Since you paid nothing for the raffle ticket, EVERYTHING you paid to the charitable organization is deductible. In the example, the full $200 is deductible.

So the answer is:  Everything, nothing, or somewhere-in-between, depending on the situation..