Because donations to charity of cash or property generally are tax deductible (if you itemize), it only seems logical that the donation of something even more valuable to you — your time — would also be deductible. Unfortunately, that is not the case; however, you can potentially deduct out-of-pocket costs associated with your volunteer work.

The basic rules

As with any charitable donation, for you to be able to deduct your volunteer expenses, the first requirement is that the organization be a qualified charity. You can use the IRS’s Tax Exempt Organization Search tool to find out.

Assuming the charity is qualified, you may be able to deduct out-of-pocket costs that are:

Supplies, uniforms and transportation

A wide variety of expenses can qualify for the deduction. For example, supplies you use in the activity may be deductible. As well as, the cost of a uniform you must wear during the activity may also be deductible (if it is required and not something you wear when not volunteering).

Transportation costs to and from the volunteer activity generally are deductible, either the actual cost or 14 cents per charitable mile driven, but you have to be the volunteer. If, say, you drive your elderly mother to the nature center where she is volunteering, you cannot deduct the cost.

You also cannot deduct transportation costs you would incur even if you were not volunteering. For example, if you take a commuter train downtown to work, then walk to a nearby volunteer event after work and take the train back home afterwards, you will not be able to deduct your train fares. But, if you take a cab from work to the volunteer event, then you potentially can deduct the cab fare for that leg of your transportation.

Volunteer travel

Transportation costs may also be deductible for out-of-town travel associated with volunteering. This can include:

Lodging and meal costs also might be deductible.

The key to deductibility is that there is no significant element of personal pleasure, recreation or vacation in the travel. That said, according to the IRS, the deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. But you must be volunteering in a genuine and substantial sense throughout the trip. If only a small portion of your trip involves volunteer work, your travel expenses generally will not be deductible.

Volunteer Time

Donations of time or services are not deductible. It does not matter if it is simple administrative work, such as checking in attendees at a fundraising event, or if it is work requiring significant experience. Regardless of the service being costlier to the charity if it had to pay for it, such as skilled carpentry or legal counsel, this volunteered time is still not deductible.

Keep careful records

The IRS may challenge charitable deductions for out-of-pocket costs, so it is important to keep careful records. If you have questions about what volunteer expenses are and are not deductible, please contact your tax adviser.

Charitable giving may help some filers reduce tax liability, particularly for high-income earners or those who have itemize deductions in excess of the new standard deduction. This 18 minute webinar shares a brief overview of tax reform and illustrates three approaches to planning for charitable giving.

Donations to qualified charities are generally fully deductible, and they may be the easiest deductible expense to time to your tax advantage. After all, you control exactly when and how much you give. To ensure your donations will be deductible on your 2016 return, you must make them by year end to qualified charities. 

When’s the delivery date?

To be deductible on your 2016 return, a charitable donation must be made by Dec. 31, 2016. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?
The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:

Is the organization “qualified”?

To be deductible, a donation also must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions. 
The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at  Information about organizations eligible to receive deductible contributions is updated monthly.
Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making. But act soon — you don’t have much time left to make donations that will reduce your 2016 tax bill.



Charitable Deductions

Summertime means cleaning out those often neglected spaces such as the garage, basement, and attic for many of us. Whether clothing, furniture, bikes, or gardening tools, you can write off the cost of items in good condition donated to a qualified charity. The deduction is based on the property's fair market value. Guides to help you determine this amount are available from many nonprofit charitable organizations.

Charitable Travel

Do you plan to travel while doing charity work this summer? Some travel expenses may help lower your taxes if you itemize deductions when you file next year:
  1. You must volunteer to work for a qualified organization. Ask the charity about its tax-exempt status. 
  2. You may be able to deduct unreimbursed travel expenses you pay while serving as a volunteer. You can’t deduct the value of your time or services.
  3. The deduction qualifies only if there is no significant element of personal pleasure, recreation or vacation in the travel. However, the deduction will qualify even if you enjoy the trip.
  4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.
  5. Deductible travel expenses may include:

    • Air, rail and bus transportation
    • Car expenses
    • Lodging costs
    • The cost of meals
    • Taxi fares or other transportation costs between the airport or station and your hotel

Renting Your Vacation Home

A vacation home can be a house, apartment, condominium, mobile home or boat. If you rent out a vacation home, you can generally use expenses to offset taxable income from the rental. However, you can't claim a loss from the activity if your personal use of the home exceeds the greater of fourteen days or 10% of the time the home is rented out. Watch out for this limit if taking an end-of summer vacation at your vacation home. 


Traveling for Business

When you travel away from home, you may deduct your travel expenses – including airfare, train, bus, taxi, meals (generally limited to 50%), lodging – as long as the primary purpose of the trip is business-related. You might have some downtime relaxing, but spending more time on business activities is critical. Note that the cost of personal pursuits is not deductible.

Entertaining Clients

If you treat a client to a round of golf at the local club or course, you may deduct qualified expenses – such as green fees, club rentals, and 50% of your meals and drinks at the nineteenth hole – as long as you hold a "substantial business meeting" with the client before or after the golf outing. The discussion could take place a day before or after the entertainment if the client is from out of state. For information on what does and does not qualify, please contact us.

Using Your Home Office  

Home office expenses are generally deductible if part of a business owner's personal residence is used regularly and exclusively as either the principal place of business or as a place to meet with patients, customers or clients. The IRS provides an optional safe-harbor method that makes it easier to determine the amount of deductible home office expenses. These rules allow you to deduct $5 per square foot of home office space (up to 300 square feet). In addition, deductions such as interest and property taxes allocable to the home office are still permitted as an itemized deduction for taxpayers using the safe harbor.

IRS substantiation rules apply to contributors

Your donors are gearing up for tax-filing season soon. It’s not too late to make sure that your organization is following the IRS donation “substantiation rules” so that your benefactors have the proof they need to deduct financial gifts. Proper documentation is also crucial so that your donors don’t have any future problems with the IRS.

Legal precedents exist

Case law generally supports the IRS. In the court ruling Durden v. Commissioner, a church had received $25,171 in contributions from a married couple. The taxpayers had canceled checks documenting these 2007 donations, and the church sent them a written acknowledgment of receipt. But the acknowledgment didn’t note whether the taxpayers had received any goods or services in exchange for their contributions. The IRS requires such a statement, so it disallowed the taxpayers’ deduction.

The taxpayers then obtained a second receipt from their church, stating that they hadn’t received any goods or services in exchange for their donations. The second receipt was dated June 21, 2009, and the IRS rejected it for failing to meet the “contemporaneous” requirement, which requires the notification to be obtained at the time of the gift.

The taxpayers appealed the IRS decision. Concluding that the couple had “failed strictly or substantially to comply with the clear substantiation requirements of Section 170(f)(8),” the Tax Court upheld the IRS’s disallowance of the deduction.

What’s required by the IRS?

For donors’ charitable contributions to be eligible for deductions on their income tax returns, they must follow the IRS “substantiation rules.” These requirements vary with the nature and amount of the donation, but clearly state that, if a taxpayer fails to meet the substantiation and recordkeeping requirements, no deduction will be allowed.

For cash gifts of under $250, a canceled check or credit card receipt is generally sufficient substantiation. If, however, any goods or services were provided in exchange for a cash gift of $75 or more, the charity must provide a contemporaneous written acknowledgment that includes a description and good-faith estimate of the value of the goods or services.

For cash gifts of $250 or more, as well as noncash gifts of $500 up to $5,000, the rules generally also require a contemporaneous written acknowledgment from the charity, which must include these four elements: 1) the donor’s name, 2) the amount of cash or a description of the property contributed (separately itemized if one receipt is used to acknowledge two or more contributions), 3) a statement explaining whether the charity provided any goods or services in consideration, in whole or in part, for the gift, and 4) if goods or services were provided, a description and good-faith estimate of their value.

If the only benefit the donor received was an “intangible religious benefit,” this must be stated. Goods or services of “insubstantial value,” such as address labels or other small incentives in a fundraising campaign, don’t need to be taken into account.

The requirements for noncash donations valued over $500 include attaching a completed Form 8283 to the donor’s tax return and, if valued over $5,000, include obtaining a qualified appraisal of the donated property. Before you accept such donations, it may be wise to confirm with the donors that they are aware of the requirements and have obtained an appraisal, if necessary.

Quid pro quo

A donation at the end of the year might be your supporters’ holiday gift to your nonprofit. Make sure that you reciprocate by giving them credit and verifying that their donations are properly documented.