Summer is a great time to get out and do some good in your community, or around the world if you’re feeling a bit more adventurous. While the satisfaction of helping others is the best reward for volunteering, you may also reap some financial benefits in the form of a tax deduction. While the IRS doesn’t allow you to deduct the value of your time or services, there are certain volunteer expenses that may qualify for a write-off. If you’re planning to do some hands-on giving this summer, here’s what you need to know to be prepared at tax time.
Volunteer expenses are only deductible when you’re helping out a qualifying organization. For IRS purposes, this means any charity that has tax-exempt status. Generally, the kinds of organizations that qualify include churches, nonprofit foundations, veterans’ groups, domestic fraternal associations, nonprofit hospitals or educational institutions and civil defense groups.
You can use the Exempt Organizations Select Check to determine whether the agency you’re volunteering for is eligible. If it’s not, you’ll be out of luck when it comes to snagging a deduction. Keep in mind that you also can’t deduct any expenses that are incurred when you volunteer for or donate money to an individual.
As of 2014, the amount of charitable donations or volunteer expenses you could deduct can’t exceed 50% of your adjusted gross income. If you received anything in return for volunteering your time, you must subtract the value of what you received from your deductible expenses.
For the most part, what you can write off as a volunteer is related to travel. The expenses must be directly related to volunteering and not reimbursable. Deductions for personal, family or living expenses aren’t allowed. For example, if you pay someone to watch your children while you’re volunteering you can’t include the cost on your taxes.
Generally, any expenses related to the use of your personal vehicle are deductible. This includes things like gas and oil but not repairs or maintenance. If you don’t want to use your actual expenses you can deduct your mileage using the standard rate, which is 14 cents per mile for 2014. Parking fees and tolls are also deductible, regardless of whether you claim your mileage or your actual expenses.
The travel expense deduction also applies if you pay out-of-pocket for airfare, rail or bus travel. In addition, you’re covered for cab fares, hotels and meals as long as the expenses are related to your volunteer efforts. For instance, if you take a day off to go sightseeing in the area where you’re donating your time, the IRS won’t let you deduct it on your taxes.
Aside from your travel expenses, you can also claim a deduction for any uniforms you’re required to buy in order to volunteer. If you have to have it dry-cleaned or altered you can generally write off these costs as well. Any incidental expenses, like long distance phone calls, office supplies or food items that you purchase specifically for the charity’s use are also deductible.
When you’re volunteering, the IRS has strict guidelines regarding the kinds of records you need to keep for a deduction. If any of your expenses are more than $250 you have to have a written acknowledgement from the charity that includes a description of what services you provided, a list of any goods or services you received in return and a summary of any reimbursements you were paid. Religious organizations should include a statement acknowledging that the only benefit you received was intangible.
You’ll also need to keep records of your travel expenses, if any. Depending on your mode of travel this might include a mileage log, gas receipts, credit card statements showing airfare charges, a copy of your hotel bill and any receipts you have for taxis or incidental expenses. The record-keeping rules for these expenses aren’t as stringent as they are for business expenses but it pays to be as detailed as possible, especially if the IRS questions your deductions down the road.
Volunteering is a worthwhile way to spend your time while making a difference in the lives of others. With a little planning, you could also do yourself some good when it comes to your taxes. For more on how you can deduct volunteer expenses and other charitable donations, check out Publication 526 on the IRS website.
This post was published on July 17, 2014