Event Ticket Pricing
Determining ticket price is just one of the many details involved in planning a successful fundraiser. When setting your event's ticket price, consider what a guest would be willing to pay to attend a similar event, as well as your guild's expenses and IRS guidelines. The following overview and example will help your guild set its ticket price and determine whether a portion of the price will be tax-deductible for guests.
When determining your ticket price, the most important distinction to understand is the difference between the perceived value of the goods and services a guest receives and your guild's costs. IRS guidelines regarding ticket price state that value, not cost, impacts the tax deduction. Ask yourself:
- What would someone likely pay to attend a similar event? Think about comparable food, beverages, ambience and entertainment (music, special performances, keynote speaker, etc.). This is the perceived value. Your ticket price should be set at value or above.
- What is your cost per person to host the event? Your costs are important to keep in mind during your overall event planning to maximize your net proceeds. As you calculate costs, take into consideration any in-kind donations your guild receives (food, beverages and other items or services) as well as cash sponsorships. These contributions will help to keep your costs low; however, they do not reduce the perceived value. After understanding the perceived value versus cost, you're ready to think about potential tax deductions:
- Value helps determine whether a portion of your ticket price is tax-deductible. Ticket price - value = tax deduction.
- If your ticket price is $75 or more, the IRS requires you to disclose what portion of the ticket price is not tax-deductible (even, and perhaps especially, if that portion is zero) by printing the information on your invitations or guest invoices.
The ABC Guild hosts a luncheon in a private room at a local restaurant. The luncheon has the following components:
- Each guest receives lunch, wine and dessert, as well as a gift bag to take home.
- The wine is donated.
- A sponsor provides $500 in cash and donates the items for the gift bags.
- The ticket price is $85, and the guild is comfortable that its guests are willing to pay this amount.
Let's follow the steps in the overview for the ABC Guild to determine if a portion of its ticket price is tax-deductible:
- Value. A guest at the ABC Guild's luncheon receives a meal, wine and a gift bag at a restaurant. Researching similar events and considering the price to purchase lunch out, someone would pay $50 for a similar experience. The items in the gift bag retail for $10. Therefore the perceived value to a guest is $60.
- Cost. The ABC Guild kept costs low, thanks to a cash sponsor and donated wine and gift bags. The restaurant charges $30 per person for lunch and dessert. With a ticket price of $85, the guild will more than cover its costs.
- Tax deduction. Because value ( $60), not cost, impacts the tax deduction, $25 is the potential tax deduction for a guest at the ABC Guild's event: $85 [ticket price] - $60 = $25.
- IRS reporting. The ABC Guild's ticket price meets the IRS threshold of $75 or more, and therefore the guild needs to print the following, on either the event invitation or guest invoice: "Of the price you pay for admission, $60 is not tax-deductible as it represents the estimated value of goods and services you receive."
Your expenses may not be limited to those outlined in the scenario; audiovisual, printing and stage rental expenses, etc., if any, should be taken into consideration. Also, tickets will likely not be your only source of revenue. Your guild might also be hosting a silent auction, live auction or dessert dash, and may have additional cash sponsorships. When considering your overall revenue and expenses, keep in mind that the Guild Association's policy is that net proceeds should be at least 65% of gross proceeds (65 cents on the dollar).
- Always think about both value and cost when setting your ticket price.
- The ticket price should be set at or above perceived value.
- Set your ticket price above costs to help recoup event expenses.
- Include a statement about the tax-deductible portion if your ticket price is more than $75 per person.