Tax Deductions for Charity Volunteers: What You Need to Know
If you volunteered for a charity or governmental organization, especially during the COVID-19 pandemic, you may qualify for some tax deductions. While the IRS doesn’t allow you to deduct the value of the time you donate, certain expenses you incur for charitable activities are deductible. This guide covers eligible deductions for charity-related expenses and essential tax rules to keep in mind when volunteering.
Key Tax Deductible Expenses for Charity Volunteers
Volunteers often incur various expenses while working for non-profit or governmental organizations. Here’s a breakdown of commonly deductible expenses:
1. Away-From-Home Travel Costs
Volunteers can deduct travel expenses like airfare, train fares, or gas costs if they travel away from home for a charity. Other eligible expenses include transportation between airports, lodging, and meals. However, these expenses are deductible only if no significant personal pleasure is involved and the volunteer activities do not include lobbying.
2. Meals and Entertainment for Charity Purposes
While volunteers cannot deduct the cost of their meals, they can deduct expenses incurred for entertaining others on behalf of a charity. For example, if you dine with a potential donor to secure a large donation for a charity, that meal expense is deductible. However, personal entertainment costs are not.
3. Automobile Expenses for Charity Work
If you use your car for charitable purposes, you can either deduct actual expenses (like gas and oil) directly attributable to the activity or use a standard mileage rate of 14 cents per mile. Parking fees and tolls are also deductible, but car depreciation is not.
4. Uniforms and Cleaning Costs
The cost of purchasing and cleaning uniforms specifically required by the charity is deductible as long as the uniform has no general utility outside of the volunteer work.
Misconceptions About Charitable Deductions
Many volunteers are unsure about what qualifies for deductions. Here are some commonly misunderstood aspects:
- Depreciation of Capital Assets: Volunteers cannot claim deductions for the depreciation of capital assets, such as vehicles or equipment used for charity work. However, costs for maintaining the assets (like fuel or repairs) used specifically for charity work are deductible.
- Ownership and Deduction Rules: If a volunteer purchases personal protective equipment (PPE) or other items for charity work, they cannot deduct the cost if they retain ownership after use. For instance, face masks purchased for volunteering aren’t deductible if kept afterward, but donations of PPE to a charity are deductible.
Substantiation Requirements for Charitable Deductions
To claim charitable deductions, it’s crucial to maintain documentation. For contributions over $250, a written acknowledgment from the charitable organization is required. Here’s how you can verify your contributions:
- Documentation from the Charity: Obtain a letter detailing the nature of the volunteering activity and the expenses required.
- Expense Statements: Submit an expense statement to the charity, ideally with receipts, and request acknowledgment of the total contribution.
- Detailed Records: Keep all records of out-of-pocket expenses, including receipts and a log of dates, locations, and the purpose of each expense.
Special 2020 Charitable Deduction Provisions
In response to the pandemic, additional provisions were introduced for the 2020 tax year:
- $300 Cash Deduction: Non-itemizers can deduct up to $300 in cash contributions to qualified charities.
- Increased AGI Limit: For itemizers, cash contributions are not limited to 60% of adjusted gross income for 2020.
- Unused Paid Leave: Employees can donate the value of unused vacation or leave time to charities without adding it to their taxable income.
Examples of Deductible and Non-Deductible Expenses
- Volunteer Travel: Suppose a volunteer drives to another city for a charity event. They may deduct mileage, parking, and lodging if no personal element is involved.
- Petty Uniform Costs: If a volunteer purchases a charity-specific uniform and dry cleans it, both the purchase and cleaning costs are deductible.
- Specific Asset Use: A taxpayer maintaining a horse for volunteer rescue work can deduct shoeing and stabling costs, though not the initial purchase price or depreciation.
By understanding these tax breaks, volunteers can better manage their tax obligations while serving the community. Consult with a tax professional to ensure you maximize your deductions and remain compliant with IRS requirements. For additional guidance, contact our office to learn more about eligible tax deductions for charity work and pandemic-specific provisions.