Last night Ally, my kindergartener, had a Daisy/Girl Scout Meeting to prepare for this year’s Girl Scout Cookie Sale. This year the price increased again to $3.50/box. While I look forward to buying and eating one or two boxes of my favorite Caramel deLites, I’m not thrilled the price increased again to $3.50/box. Do you also wonder if a box of these delicious yet small cookies are being sold at fair market value at $3.50/box and if it is a valid tax deduction? You’re not alone; I usually get asked this question a couple of times a year.
First let me go over the Girl Scout Cookie Selling Program for anyone that has lived in a cave the past couple of decades.
Girl Scout Cookie Program
Cookie selling dates back to December 1917 when a troop in Oklahoma baked cookies and sold them in its high school cafeteria as a service project. The program has expanded into an international program is now a large source of revenue for Girl Scout troops to fund their programs. According to their brochure, the cookie program help girls learn life-long leadership and team building skills.
For 2012, each box of cookies sells for $3.50 and include Thanks-A-Lot, Shout Outs!, Lemonades, Shortbread, Thin Mints, Peanut Butter Patties, Caramel deLites and Peanut Butter Sandwich.
Tax Deduction as Charitable Contribution
Back to the question for today – can you claim a tax deduction for the purchase of Girl Scout cookies? At first glance, you might think you can because the IRS does allow a deduction for charitable contribution to a qualified organization for the amount that it exceeds fair market value and if you did not receive any amount of financial or economic benefit in return.
Example 1: If a taxpayer pays $5 for a box of popcorn, and a similar box of popcorn can be purchased in a store for $2, the taxpayer may deduct a $3 contribution.
Example 2: If a taxpayer gave $100 to a museum and received a book in return that sells regularly for $25, you can claim $75 as a charitable deduction.
Now if take a look at the Girl Scouts website; they claim each box of cookies is priced at fair market value. As such, if you buy and consume the cookies, you can not claim a tax deduction.
However, you can deduct the cost of girl scout cookies if you donate it to a qualified organization. In this case, you would include the amount on Form 1040, Schedule A, Line 17. Take a look at an earlier article on charitable contributions, reporting requirements and how to claim on your tax return.
More Tax Tips for Tuesday
Pretty soon forms and documents that you need prepare your 2011 tax return will appear in your mailbox. Get ready by organizing your personal financial records and creating a filing system. If your 2011 tax return is fairly simple, a smaller organizer or expandable file from Amazon will be fine. For more complex tax returns, you will want something more sturdy like a file box with bottom drawer.