Up to a maximum of $200 per year. Not very exiting.
On a related note, could one create a non-profit open source company, and donate software to it and get tax write-off? Rich folk can get huge tax write off donating art works, we should be able to figure out a similar deal.
The question is how to value the contribution. Few things come to mind, most of them ugly - 1) by time spent at prevailing wage for your experience level 2) by line count 3) by some sort of proxy for market value.
Artworks for the rich have advantage in that there are fewer of them that get attentions and they are more expensive, hence a market for each one easy to establish with auctions, expert opinions, and the like.
I'm thinking we could have some kind of payback thing, where users of open source would declare how much time they saved by using the software, or how much an alternative would cost, and then we could use this as a proxy for value.
Dunno. Just a bunch of random ideas for brainstorming.
Donations are valued at your basis in them. Your basis in software you developed will generally be zero. Your basis in paintings you painted is slightly higher than zero: the cost of paint.
If you buy software or paintings, your basis the "the cost required to acquire them." So if you wanted to buy a major piece of software then donate it (subject to the usual requirements for this to not be abusive), then you'd be able to take the charitable deduction.
In most cases, the people writing OSS work for corporations. Corporations have a very simple way to get tax benefits from supporting OSS work -- expense it. Done.
Indeed, as far as IP is concerned, the following rule governs.
[...] your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. Generally, this means your deduction is the lesser of the property's FMV or its basis. For details, see Publication 526. [...]
"The basis of an intangible asset is usually the cost to buy or create it."
They don't mention software specifically, but they say that for patents and copyrights you can only include costs you actually paid for, and you specifically may not include the value of your own time spent inventing or authoring.
Although that appears to be true for software or paintings you create yourself (see discussion below), I don't think it's actually true for software or paintings that you bought. In those cases you would deduct the fair market value at the time of the donation (with some exceptions).
This is actually a common tax loophole: you can donate appreciated stocks and get a write-off for the full value, without having to pay taxes on the gains.
I like the concept of deducting some of my time for open source contributions but every solution I've seen is a boondoggle waiting to happen..
* Deduct based on (hours spent * prevailing wage) -> Which prevailing wage? Personally, I'd love to use the hourly rate of Google employees in my deductions. ;)
* Deduct based on (hours spent * current rate) -> Who said I would have been working those hours anyway?
* Deduct based on hours spent * (any number)? That means I need detailed accounting that can stand up to an audit.
* Deduct based on LOC? Woohoo! Time for bloated code!
* Deduct based on time/money saved by companies? Time to call in favors!
* Deduct based on the value of what I learned as an educational credit? I like this one the most but we don't always know what will be valuable at the time.
As much as I want this to work, I don't see a structure that won't result in abuse and shenannigans on day one.
Yeah, honestly, the government should just mark $X to be spent on open source donations / development as its simply less risk for similar results to a tax credit.
Hah, good point. I guess downthread people say you can use it to get a 20% refund on your RAM upgrade or something. Guess you'll have to go that route.
Seems silly to me. Add complexity to the tax code to give an insignificant/unnoticeable break to one of the wealthiest demographics around. The existing financial incentives for open source contributions are probably two orders of magnitude greater than this.
I don't know the amount, but it certainly wouldn't surprise me if the authors of popular open source libraries boosted their earning power by that much or more.
The '$200 per year, not interesting' comments are missing the point. Politics is a game of increments. If you want a measure in place for a large amount of money a few years down the line, you typically need to get it in place for a small amount of money this year, and then next year show it didn't blow up in anyone's face. So yes, this is a very good move.
An election may not be made if such election is in effect
for such individual for any other taxable year and
pertaining to the same program or any portion thereof.
Also, do expenses include my time value? If not, what other expenses are there for OSS devs?
That said, if this passes it will be most positive piece of software legislation from 2016. Only downside is if taxation brings about regulation.
> Also, do expenses include my time value? If not, what other expenses are there for OSS devs?
I'm not sure from a legal standpoint as IANAL, but I can think of the price of a computer, a desk, a chair, Internet, etc. There are other costs associated with contributing to OSS in addition to the time.
That article was poorly written. But then again, the bill was poorly written. A "200 max" isn't going to be worth anybody's time. And anyway, what problem is this bill trying to address? If I'm a business and I have an expense, I write it off. If I'm make a donation to a non-profit, I write it off. What does this bill change?
I think this is just extending this to NY state taxes, limiting to OSS development, and capping it at $200. All of which is a bit odd, but I guess it's a foot in the door and symbolically recgognizes OSS.
As I understand it, if artists donate works they can only deduct the materials. The problem is basically that you can donate value, which can result in a deduction - but if that value is achieved through work, you'd have to pay income taxes on that. For example, you could donate, say 5000$ to some non-profit software organization, then have that organization hire you to write FOSS, for 5000$ dollars, and get back that money. On the donation you'd get a deduction, but on the pay-back you'd owe taxes - so you're back at square one.
I don't see how donating work could work, given how taxes work. Is there any example where donating work is tax-deductible?
On a related note, could one create a non-profit open source company, and donate software to it and get tax write-off? Rich folk can get huge tax write off donating art works, we should be able to figure out a similar deal.
The question is how to value the contribution. Few things come to mind, most of them ugly - 1) by time spent at prevailing wage for your experience level 2) by line count 3) by some sort of proxy for market value.
Artworks for the rich have advantage in that there are fewer of them that get attentions and they are more expensive, hence a market for each one easy to establish with auctions, expert opinions, and the like.
I'm thinking we could have some kind of payback thing, where users of open source would declare how much time they saved by using the software, or how much an alternative would cost, and then we could use this as a proxy for value.
Dunno. Just a bunch of random ideas for brainstorming.