Volunteering for Charity: Do You Get a Tax Break?
If you’re a volunteer who works for charity, you may be entitled to some tax breaks. This is possible if you itemize deductions on your tax return. Unfortunately, the deductions may not amount to as much as you think.
Donations to charity of cash or property are generally tax deductible for itemizers. It may seem like donations of time would also be deductible. However, tax deductions are not allowed for time you spend volunteering or the services that you perform for a charitable organization.
It doesn’t matter if the services you provide require significant skills and experience. For example, a charity would have to pay dearly for construction if it went out and obtained it itself. You still don’t get to deduct the value of your time.
However, you can potentially deduct out-of-pocket costs associated with your volunteer work.
The basic rules for charity donations
To be able to deduct your volunteer expenses, the first requirement is that the organization has be a qualified charity. You can check by using the IRS’s “Tax Exempt Organization Search” tool.
If the charity is qualified, you may be able to deduct out-of-pocket costs that are unreimbursed. They have to be directly connected with the services you’re providing. The cost must be incurred only because of your charitable work and not “personal, living or family” expenses.
Expenses that may qualify
A wide variety of expenses can qualify for the deduction. For example, supplies you use in the activity may be deductible. The cost of a uniform you must wear during the activity may also be deductible if it’s required and not something you’d wear when not volunteering.
Transportation costs to and from the volunteer activity generally are deductible. Either the actual expenses such as gas costs)or 14 cents per charitable mile driven are deductible. The cost of entertaining others (such as potential contributors) on behalf of a charity may also be deductible. However, the cost of your own entertainment or meal isn’t deductible.
Deductions are permitted for travel expenses while performing services for a charity. This includes round-trip travel expenses, taxi fares, and other costs of transportation. Other expenses include lodging and meals. However, these expenses aren’t deductible if there’s a significant element of personal pleasure associated with the travel. Expenses are also not deductible if your services for a charity involve lobbying activities.
Recordkeeping is important
The IRS may challenge charitable deductions for out-of-pocket costs. So it’s important to keep careful records and receipts. You must meet other requirements for charitable donations. For example, no charitable deduction is allowed for a contribution of $250 or more unless you substantiate the contribution with a written acknowledgment from the organization. The acknowledgment generally must include the amount of cash, a description of any property contributed, and whether you got anything in return for your contribution.
In order to get a charitable deduction, you must itemize. Under the Tax Cuts and Jobs Act, fewer people are itemizing because the law significantly increased the standard deduction amounts. So even if you have expenses from volunteering that qualify for a deduction, you may not get any tax benefit if you don’t have enough itemized deductions.
If you have questions about charitable deductions and volunteer expenses, please contact us.