13 Sep Tax Breaks For Providing Volunteer Work For Charity
Many of our clients ask how they can deduct their volunteer time and costs for charity. You should be aware that your generosity may allow you to take certain tax breaks.
The confusion often sets in when clients think that their time is deductible. Unfortunately, there is no tax deduction allowed for the value of services that you or your business provides to the charity. However, some deductions are permitted for the actual out-of-pocket costs that you incur while providing the services. As always, these are subject to the deduction limits that generally apply to charitable contributions. This may include such items as:
- Away-from-home travel expenses while performing services for a charity (out-of-pocket round-trip travel cost, taxi fares and other costs of transportation between the airport or station and hotel, plus lodging and meals). However, these expenses aren’t deductible if there’s a significant element of personal pleasure associated with the travel, or if your services for a charity involve lobbying activities.
- The cost of entertaining others on behalf of a charity, such as wining and dining a potential large contributor (but the cost of your own entertainment or meal is not deductible).
- If you use your car while performing services for a charitable organization you may deduct your actual unreimbursed expenses directly attributable to the services, such as gas and oil costs. Alternately, you may deduct a flat 14¢ per mile for charitable use of your car. In either event, you may also deduct parking fees and tolls. It is usually always easier to take the mileage deduction, so keep track of your miles with a mileage log!
- You can deduct the cost of a uniform you wear when you do volunteer work for the charity, as long as the uniform has no other general utility (e.g., a volunteer ambulance worker’s jumpsuit). You can also deduct the cost of cleaning the uniform.
It is important to note that no charitable deduction is allowed for a contribution of $250 or more unless you receive a written acknowledgement from the organization to which you are providing the contributions. The acknowledgment generally must include the amount of cash, a description of any property contributed, and whether you received anything in return for your contribution. This can be a problem if you are providing contribution on behalf of the charity, rather than directly to it. A good idea is to have the charity directly reimburse you for what you spent for the charity. If you can’t do that, then the following may steps can be taken to safeguard your deductions:
- Get written documentation from the charity about the nature of your volunteering activity and the need for related expenses to be paid. For example, if you travel out of town as a volunteer, get a letter from the charity explaining why you’re needed at the out-of-town location.
- If you are out-of-pocket for substantial amounts, you should submit a statement of expenses and, preferably, a copy of the receipts to the charity, and arrange for the charity to acknowledge in writing the amount of the contribution.
- You should maintain detailed records of your out-of-pocket expenses—receipts plus a written record of the time, place, amount, and charitable purpose of the expense.
These general rules are the same if you are a business or individual providing services and other costs to a charity.
The charity must be a registered charity with the IRS, and you should get that acknowledgment from them of this for your files. I have seen where clients sometimes think that the charity is a registered IRS charity, but later learn that it is not. Sometimes, this happens with small, local charity groups (sports teams, small local religious groups, etc.). If you are just trying to help someone or an organization out, but they have not yet properly registered their charity with the IRS, you will want to advise them to do so prior to donating, so that you are able to deduct your costs.
As always, before deducting any expenses, it is best to contact one of our tax accountants to make sure you are on the right track. Your specific circumstances may be different than others. We are here to advise you as our valued client!
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