Updated date:

Downsides of Donating Self-Published Book Profits to Charity

Heidi Thorne is a self-publishing advocate and author of nonfiction books, eBooks, and audiobooks. She is a former trade newspaper editor.

Considering donating the profits from your self-published book to charity? Here's why I'd advise against that.

Considering donating the profits from your self-published book to charity? Here's why I'd advise against that.

"I’m going to donate all my self-published book’s profits to charity." Good for you . . . but also not good for you. I’d suggest just making a cash donation to your favorite charity instead of sharing some or all of your book’s profits. Let me explain why.

Do You Have Enough Profits to Donate?

As my self-publishing surveys in both 2016 and 2018 found, about 73% of self-published authors surveyed earned less than $1,000 per year in book income. Note that this data was gathered in two separate surveys, two years apart, and from two different author participant populations. And this was gross income—not net income after expenses and taxes. There’s a good chance that self-published authors aren’t making enough money to share any profits.

Even if you’re one of the self-published authors that do make more than $1,000 per year, does it make sense to do giveback donations as you earn more in book income? Let’s do some math.

The Numbers You Need to Make a Donation Decision

Let’s say that you’re doing an all-profits donation for one of your Kindle eBooks. Through Kindle Direct Publishing (KDP). The maximum royalty you can make is 70% of the sale price. For some markets and lower-priced eBooks ($2.99 or less as of this writing), you’ll only earn 35%.

But there are two other percentages you need to deduct from royalties: overhead and cost of goods sold (COGS). Overhead covers all costs to run your writing business, including advertising, internet service, website hosting, software, telephone, postage, accounting services, etc. Overhead can be 25% to 35% or more of your total business income or even up to 100% of your income, especially in very small and new businesses. Please don’t say that you don’t have these costs. You do! You always do.

COGS is all costs that go into producing each copy of your book you sell. For Kindle eBooks, there aren’t many COGS costs except for a delivery fee based on file size at the 70% royalty level, which might be minimal. There are no delivery fees at the 35% royalty level.

Example

For example’s sake, let’s say you’re just selling Kindle eBooks, your overhead rate is 35%, and you have 0% COGS. These are the percentages you'd donate to charity if you gave them all profits:

70% royalty of eBook retail price - 35% Overhead - $0 COGS = 35% net profit

35% royalty of eBook retail price - 35% Overhead - $0 COGS = 0% net profit

In this example, it doesn’t make any difference what you charge at the 35% royalty level since you’re making 0% net profit and not making any donation.

But at the 70% royalty level, say you’re charging $6.95 for your Kindle eBook:

$6.95 retail price X 35% net profit = $2.43 to charity per book

If you sell 100 books a year, which might be optimistic for lots of self-published titles, you’d send your charity $243 if your book is in the 70% royalty level. Considering that some estimates show self-published authors selling only about 250 copies in the lifetime of a book, it’s not going to amount to a whopping donation to charity, even over its entire time on the market.

Is the Profit Situation Better for Print Books?

If you’re sharing profits from sales of your print book, you’re likely to be in the loss zone once your overhead and COGS are added in even though print books are generally sold at a higher price point.

In some quick calculations I did with KDP’s printing cost calculator for a paperback book with 250 black and white interior pages sold through Amazon priced at $14.95, your estimated print royalty is 34% ($5.12) after print COGS costs are deducted. As we did with the previous example, let's estimate a 35% overhead cost, which would be deducted from your net royalty:

34% royalty - 35% Overhead = -1% net profit (loss)

So, for print in this example, you’re sustaining a loss, meaning you’re paying to publish and sell this title—which is not good—and giving $0 to charity.

These calculations are based on self-publishing your print book through KDP and selling it on Amazon. If you do Expanded Distribution via KDP (sales from all non-Amazon channels such as bookstores, libraries, schools, etc.), or you use a non-Amazon self-publishing platform such as IngramSpark or Lulu, your royalties might be even less, making it less likely you’ll be donating anything to charity.

None of these calculations—for either eBooks or print books—take into account any investment cost in preparing your book for publication, including editing and book cover design. You might be in the hole even before you start selling.

Bottom line: You need to be profitable to be charitable.

You need to be profitable to be charitable.

— Heidi Thorne

Tax Implications of Donating Profits to Charity

If you do indeed give all your net profits to charity, you'd better have receipts to prove that it went to a legit charity, usually one that has a verifiable 501(c)(3) designation. Additionally, you'd better be able to clearly show how you calculated your donation; otherwise, the IRS (or your area’s taxing authorities) could tax you on your income.

It’s also been my experience that many authors have little to no experience with accounting, bookkeeping, and taxation, making it difficult to figure out how much will actually go to charity.

Before you do any sort of “profits to charity” scheme, consult your CPA or tax advisor.

The Optics of Donating Profits to Charity

How will you handle the donation to a specific charity? Will it be a public donation? Most charities welcome cash donations. But does this group want to be identified with you? Is it a charity your market resonates with? What if public sentiment about this charity changes in the future? With increased scrutiny of donation activities these days, it’s worth thinking about the PR ramifications for both you and the charity.

And why are you doing this in the first place? To make your audience think you’re so generous? Do you have a negative attitude toward publishing for profit, and so you've decided to give it all away? Are you unable to financially support the charity yourself, so you want to muscle your readers/buyers into making the donation for you? Are you trying to emulate the big corporations who do this even though you don’t have anywhere near the resources they do?

How long would you be willing to do this for the charity? A year? Forever? Once people know you’re donating all profits to charity, they will think that you’re going to do this all the time. Will they think less of you when you go back to being for profit?

Remember, too, that books are not like other retail products with suitable substitutes. Readers aren’t going to be making either/or decisions between your books and those of competitors, so a giveback donation isn’t as much of a differentiator as it might be in other markets. My personal feeling is that the whole “profits to charity” trend isn’t as exciting as it used to be. Too many people are doing it (or doing it wrong), which elicits a “meh” response.

Do some soul-searching to see if you’re just doing this for the “optics” and how it might impact your writing business’ image and PR.

Avoiding Charity Burnout

I was on the board of directors and served as the treasurer for a 501(c)(3) charity for years. This was a volunteer post. While I truly believe in the cause, and still support it even now, it was a lot of work. I know how easy it can be to get burned out from participating in charitable efforts.

How long would you be willing to do the hard work of self-publishing for no pay, even if it was for a good cause? Why not just write a check?

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2021 Heidi Thorne

Comments

Heidi Thorne (author) from Chicago Area on September 06, 2021:

Thanks, Linda, for reading and your kind comments! Have a great week ahead!

Heidi Thorne (author) from Chicago Area on September 06, 2021:

Peggy, the record keeping for nonprofit issues is ridiculous. Even though I was a treasurer on a nonprofit Board, we consulted CPAs on tax and accounting issues. It's just not worth having to deal with the IRS if you do something wrong. Yeah, I'm all for just writing a check.

Thanks so much for joining in the conversation! Hope you're staying safe with all the hurricane weather near you. Have a relaxing Labor Day!

Heidi Thorne (author) from Chicago Area on September 06, 2021:

Adrienne, the verified charity issue is so important! And, yes, I always recommend getting an accountant to help people navigate those waters. It's too easy to get into trouble. Thanks so much for reading and your thoughtful comments! Have a relaxing Labor Day holiday!

Adrienne Farricelli on September 03, 2021:

Thank you for posting this important article on donating profits from self publishing to charities. You make very valid points and it's so true that one must firstly evaluate earnings before going the charity route. I learned the hard way the importance of donating to valid charities that have a verifiable 501(c)(3) designation. Having an accountant to help out is priceless.

Peggy Woods from Houston, Texas on September 01, 2021:

I agree that the bookkeeping involved does not make it seem like a good idea. As you wrote: "Just write a check," or donate your time. Charities need volunteers to make them successful.

Linda Crampton from British Columbia, Canada on September 01, 2021:

You’ve shared some excellent and thought-provoking information, Heidi. Thank you for continuing to share your knowledge.

Heidi Thorne (author) from Chicago Area on September 01, 2021:

Flourish, this is one of those cases of good intentions gone bad. And the charity can't take good intentions to the bank. So just give already, right?

Thanks for chiming in and have a relaxing Labor Day weekend ahead!

Heidi Thorne (author) from Chicago Area on September 01, 2021:

Bill, I think my charities would have a similar issues. Yeah, thanks for the buck that we now have to track in our accounting. :-D And our monthly royalties can vary so widely that I think this is a good intention gone bad.

No rain for 75 days. Wow! I'd go nuts with that. Will start doing a rain dance for you. (Disclaimer, it might not work, but, again good intentions.)

Bill Holland from Olympia, WA on August 31, 2021:

I'm afraid if I did this, the charity would think I was being insulting. lol Here's two bucks for your charity...I hope it helps! LOL But I hear what you're saying and, as always, excellent information.

I hope this finds you well. We still have no rain (75 straight days), but the weather is perfect.

FlourishAnyway from USA on August 30, 2021:

Write a check and be done with it. You are so right. No one wants to wait for some unknown figure. Give an exact figure now and maybe later too!

Related Articles