March 22, 2023

Bucks Blog: Girl Scout Cookies as a Tax Deduction

Boxes of Girl Scout cookies sold in 2012.Reuters Boxes of Girl Scout cookies sold in 2012.

Last weekend, The Wall Street Journal ran an article on how some states, like Idaho, tax the sale of Girl Scout cookies. That got us thinking about another tax-related question having to do with Samoas and other Girl Scout treats.

Why aren’t Girl Scout cookies tax deductible?

The wholesale cost of a box of cookies averages about $1 a box, and they sell for $3.50 to $5, according to the Girl Scouts. (Local councils set the price.) Shouldn’t the few dollars’ difference be tax deductible as a donation?

Michelle Tompkins, a spokeswoman for the scouts, explained in an e-mail that the group interprets “standard” Internal Revenue Service guidance to find that the cookies are not tax deductible, if you buy them and take them home to eat. In that case, “you’ve purchased a product at a fair market value,” she wrote. “For this reason, no part of the price of a package of Girl Scout cookies used in this way is tax-deductible.”

If, however, you pay for the cookies, but leave the boxes with the Girl Scouts as a donation, you can deduct the cost of the cookies. (Why on earth, you may ask, would you pay for Thin Mints, if not to eat them as soon as possible? The answer is that the cookies can be donated as part of the organization’s “gift of caring” program and sent to someone else, like to soldiers overseas.) “Customers not receiving Girl Scout cookies don’t benefit directly from paying for them, so those individuals may treat the purchase price of the donated cookies as a charitable contribution,” Ms. Tompkins wrote.

You can also donate the cookies you buy to another charitable organization and take the value as a tax deduction.

Gregg Wind, an accountant in Los Angeles, says I.R.S. rules (see Publication 526) say you can’t deduct anything from which you receive a personal benefit. So, for instance, when you buy a $100 ticket to a fund-raiser that includes a $50 meal, you can’t deduct the cost of the meal, just the remaining $50.

In the case of Girl Scout cookies, he said, it doesn’t matter so much how much the box of cookies cost the Girl Scouts, but rather what the going price is for a box of cookies. When you pay for Girl Scout cookies, the price is “fairly close to what a box of cookies would cost in the store,” he said.

It occurred to us at Bucks, though, that some store cookies were similar to Girl Scout cookies and might be priced differently. If you are really determined to get a tax deduction, why not, perhaps, compare the price of the store cookies with a box of actual Girl Scout cookies and then follow the general rule of subtracting the fair market value to arrive at a deduction? If the price for the store version is $3 and the Girl Scout version is $5, you can perhaps argue that the fair market value is $3, and you are making a deductible donation of $2. (It probably wouldn’t be worthwhile, though, unless the price difference is really substantial, or you bought a lot of Girl Scout cookies.)

Ms. Tompkins dismissed that approach in a follow-up e-mail. “There really is no valid comparison here,” she wrote. “In other words ‘similar’ is not the same.”

She continued,  “Girl Scout cookies are manufactured as authorized by Girl Scouts of the U.S.A. and are not sold in stores. Each Girl Scout council independently sets their own retail price. ”

Oh well. I guess I’ll just enjoy my Tagalongs with a cold glass of milk.

Do you think part of the cost of a box of Girl Scout cookies should be tax deductible?

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Bucks: When the Tax Tail Wags Your Investment Dog

Carl Richards

Carl Richards is a certified financial planner in Park City, Utah, and is the director of investor education at BAM Advisor Services. His book, “The Behavior Gap,” was published this year. His sketches are archived on the Bucks blog.

With less than a month to go until Election Day, it’s hard to miss all of the speeches about taxes. Tax rates, tax codes, tax deductions. So it’s easy to see why we’re so tempted to get really focused on our own personal tax situation and how to eke out a better result for ourselves.

But you know the old saying that we shouldn’t miss the forest because we’re so focused on the trees? Well, it happens with our investment decisions and taxes on a regular basis.

I had a recent conversation with some friends about a rental home they owned. They were evaluating their options for the property. Should they keep it? Remodel it? Sell it and look for an alternative investment?

As we walked through the details, it became clear to all of us that they have a great little investment in the context of their overall financial plan. Based on the price they paid years ago, the money they put into the house, the rental history and the income they collect, it appeared to be a much better investment than the alternatives they were considering, even when we accounted for the risk associated with rental properties.

But as soon as we came to that conclusion, they asked me this: “Why did our accountant tell us the opposite?”

Now, their accountant prefaced his advice with the disclosure that his job was to focus on taxes. Based on that perspective, his advice was to sell it because they currently qualified for a substantial tax savings on the capital gain that would not be available to them in the near future.

To be clear, the accountant didn’t give my friends bad advice. Instead he gave them advice based on one perspective, taxes. The reality is that smart, long-term financial decisions need to take more than one thing into consideration. But because taxes are associated with so much emotion (given how much people truly hate paying them), it’s incredibly easy to let taxes become our sole focus. And that can lead to bad decisions.

In this particular example, even when you included the tax savings, it still made sense to keep the property once we zoomed out and considered the decision in the context of their overall plan. In this instance, we were trying to avoid the trap of the tax tail wagging the investment dog.

Another situation where taxes can cloud our judgment comes in the form of spending more to deduct more. I’ve heard one of my doctor friends say that she’d been told to buy a larger home with a bigger mortgage so she could receive the greater interest deduction.

Now there may be other reasons to buy a bigger home, but spending another dollar in interest just so you can get something far less than that back in taxes just doesn’t make sense unless it’s part of some bigger plan.

Taxes and the way we feel about them can pull us into emotional quicksand. And when we make taxes our primary focus for financial decisions, it’s no wonder we get trapped into making decisions we may regret later. In the case of my friends, if they’d skipped over their initial assessment and made the decision to keep or sell the rental property based solely on the tax advice, they most likely would have regretted it.

Yes, we need to know the tax implications of our decisions, and getting good advice on the issue is helpful. But we need to be really careful to not let one perspective keep us from seeing the forest and making the wiser decision for our overall plan.


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