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So, I'm a freelance web programmer by trade, which means that my time really is money. I, occasionally, work on side projects of my own and forgo the possibility of earning direct income for that time.

I wonder, can my freelancing business bill my side project (as a business) for time spent? Could I deduct that expense from the side project's taxes?

This is in regards to U.S. tax law.

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    Side projects of your own like a family website, or side projects like helping out a charity organization?
    – MrChrister
    May 28, 2013 at 17:52
  • Are you asking if you can donate your time to a charity and claim that donation as a tax deduction? May 28, 2013 at 18:36
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    I'm not aware of any situation where opportunity cost would be considered a business expense.
    – JohnFx
    May 28, 2013 at 19:09
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    You need to spell this out a bit more clearly. As I read this, it sounds like you feel there are things that you are doing that are applicable to the programming. Similar to a lawyer who will bill hours spent researching a case. Is this what you want to do, bill clients for this extra time? May 28, 2013 at 19:14

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To expand a little on what littleadv said, you can only deduct what something cost you. Even if you had done volunteer work for a charity as a sole prop you could only deduct your actual costs. If you paid an employee to do charity work or to learn something related to the business that would be deductible as a normal business expense.

Some common sense would show that if you could deduct something that didn't cost you anything (your time) you could deduct away all of your income and avoid paying taxes altogether.

Back to your more nuanced question could 2 businesses you own bill each other for services? Yes, but you will still have to pay taxes for money earned under each of them. You will also need to be careful that the IRS does not construe the transactions as being done solely to lower your tax bill.

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No, you cannot write off time, period. You should price the time spent into your product.

I, occasionally, work on side projects of my own and forgo the possibility of earning direct income for that time.

Income not earned is income not taxed, so there's nothing to deduct.

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You can say that your company did work for you as a private person and got paid. So you pay money out of your private pocket to your company. The company will have to pay tax on its profit, and will possibly have to charge you VAT. Then the company will pay you a salary, on which you pay income tax. So I estimate that you would lose say 30 to 40% of what you pay, possibly more, going to the tax man.

When you plan a scheme like this, make a chart where there is the company C, a company employee X, and a customer Y, all unrelated.

Y can deduct the cost if it is a business expense. It doesn’t sound like a business expense to me (seems to be something you do just for fun), so it wouldn’t be tax deductible for Y. For C, it is income and increases the profit, so tax has to be paid on that. All in all, you likely lose. If Y is a private customer (you as a person), you definitely lose.

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