Charity Tax Exempt Status
General Rules for Deducting Volunteer Expenses
Away-From-Home Travel Expenses
Entertaining For Charity
Use of a Capital Assets
Church Deacon Substantiation Requirements
If you volunteer your time for a charity, you may qualify for some tax breaks. Although no tax deduction is allowed for the value of services performed for a charity, there are deductions permitted for out-of-pocket costs incurred while performing the services.
To claim a tax deduction for charity work, you must itemize your tax deductions using IRS Schedule A, and the charitable organization must have IRS tax-exempt status. Qualified organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals. You will find descriptions of these organizations under Organizations That Qualify To Receive Deductible Contributions.
If you are unsure, you can double check if the organization is exempt by asking for a copy of the IRS letter showing their tax status.
These general rules apply to tax deductions related to charitable volunteer services:
You can’t assign a value to your time or services and deduct it on your tax return.
Example: You volunteer 8 hours a week at the office of a qualified organization. An employee of the organization is paid $15 an hour for the same work. You CANNOT therefore deduct $120 as the value of your services.
You can’t deduct expenses related to other’s volunteer expenses.
You must itemize your deductions to benefit from any allowable deductions.
The normal charity deduction limits and substantiation rules also apply.
Although you can't deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. The amounts must be:
Directly connected with the services.
Expenses you had only because of the services you gave, and that
Are not personal, living, or family expenses.
Away-From-Home Travel Expenses – Eligible away-from-home travel expenses while performing services for a charity include out-of-pocket round-trip travel cost, taxi, and rideshare fares, and other costs of transportation between the airport or station and hotel, plus lodging and meals at 100%. These expenses are only deductible if there is no significant element of personal pleasure associated with the travel, or if your services for a charity do not involve lobbying activities.
The deduction for travel expenses won't be denied simply because you enjoy providing services to the qualified organization. You are still entitled to a charitable contribution deduction for travel expenses if you are on duty in a real and significant sense throughout the trip. If the duties are insignificant or you don't have any duties, you won’t qualify to deduct your travel expenses.
Example: You are a troop leader for a tax-exempt youth group, and you take the group on a camping trip. You are responsible for overseeing the setup of the camp and for providing adult supervision for other activities during the entire trip. You participate in the activities of the group and enjoy your time with them. You oversee the breaking of camp, and you transport the group home. You can deduct your travel expenses.
Because travel expenses aren't business-related, they aren't subject to the same limits as business-related expenses. Thus, unlike business meals that are only allowed at 50% of the cost, charity-related meals are 100% deductible. Travel expenses include:
Air, rail, and bus transportation.
Out-of-pocket expenses for your car.
Taxi and ride-share fares, or other costs of transportation between the airport or station and your hotel.
Lodging costs, and
The cost of meals.
The Tax Court has held that the cost of first-class accommodations are deductible if they are “reasonable” under the facts and circumstances, using criteria similar to those that would apply if the traveler were on a business trip.
If the qualified organization provides a daily allowance to cover reasonable travel expenses, including meals and lodging, the charity volunteer must include in income any part of the allowance that is more than the deductible travel expenses. The volunteer may be able to deduct any necessary travel expenses that are more than the allowance.
Vehicle Expenses - A charitable contribution can be claimed for unreimbursed out-of-pocket expenses, such as the cost of gas and oil, directly related to the use of a car in giving services to a charitable organization. However, general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance cannot be deducted.
In lieu of deducting actual expenses, a standard mileage rate of 14 cents a mile can be used to determine the contribution amount. This amount was set by Congress decades ago and is not adjusted for inflation the way the standard business mileage rate is.
In addition, to the above, parking fees and tolls are deductible.
Entertaining for Charity – Another eligible expense is 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). The meals or entertainment on behalf of a charity may be provided in the taxpayer's home.
Uniforms - The cost of the uniforms worn when doing volunteer work for the charity, provided the uniform has no general utility, is deductible. The cost of cleaning the uniform can also be deducted.
Example: Jan is a volunteer nurse’s aide at a hospital. Jan can deduct the cost of buying and cleaning her uniforms if the hospital is a qualified organization, the uniforms aren't suitable for everyday use, and she must wear them when volunteering.
Use of a Capital Assets - A taxpayer who buys an asset and uses it while performing volunteer services for a charity can’t deduct its cost if he or she retains ownership of it. That’s true even if the asset is used exclusively for charitable purposes.
Conventions - If a qualified organization selects you to attend a convention as its representative, you can deduct your unreimbursed expenses for travel, including reasonable amounts for meals and lodging, while away from home overnight for the convention.
You can't deduct personal expenses for sightseeing, fishing parties, theater tickets, nightclubs, or similar activities. You also can't deduct travel, meals and lodging, and other expenses for your spouse or children.
You can't deduct your travel expenses in attending a church convention if you go only as a member of your church rather than as a chosen representative. You can, however, deduct unreimbursed expenses that are directly connected with giving services for your church during the convention.
Underprivileged Youths - You can deduct reasonable unreimbursed out-of-pocket expenses you pay to allow underprivileged youths to attend athletic events, movies, or dinners. The youths must be selected by a charitable organization whose goal is to reduce juvenile delinquency. Your own similar expenses in accompanying the youths aren't deductible.
Foster Parents - Some of the costs of being a foster parent (foster care provider) may be treated as a charitable contribution if you have no profit motive in providing the foster care and aren't, in fact, making a profit. A qualified organization must select the individuals you take into your home for foster care. You can deduct expenses that meet both of the following requirements.
They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child.
They are incurred primarily to benefit the qualified organization.
Unreimbursed expenses that can't be deducted as charitable contributions may be considered support provided in determining whether the foster child can be claimed as a dependent.
However, if you cared for a foster child because you wanted to adopt the child, and not to benefit the agency that placed the child in your home, your unreimbursed expenses aren't deductible as charitable contributions.
Church Deacon – A church deacon can deduct as a charitable contribution any unreimbursed expenses paid while in a permanent diaconate program established by the church. These expenses include the cost of vestments, books, and transportation required to serve in the program as either a deacon candidate or an ordained deacon.
No charitable deduction is allowed for a contribution of $250 or more unless you substantiate the contribution with a written acknowledgment from the charitable organization (including a government agency). To verify your contribution:
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, request a letter from the charity explaining why you’re needed at the out-of-town location.
You should submit a statement of expenses to the charity if you are paying out of pocket for substantial amounts, preferably with a copy of the receipts. Then, arrange for the charity to acknowledge the amount of the contribution in writing.
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.
For additional details related to expenses incurred as a charity volunteer, please contact this office.
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Tim Thompson CPA PLLC is located in Dallas, Texas and is an expert in all areas of Texas taxes. We can help with individual or business taxes, tax resolution, tax preparation, and tax planning services.