If you volunteer for a charity, you should be aware that your generosity may entitle you to some tax breaks.
I personally have found these strategies to be critical in my own personal tax savings plan because I am a ScoutMaster and find myself going on a trip every month trying to get a good nights sleep on the hard ground. If I’m going to go, besides the joy I receive serving boys in the Scouting program, I would sure like a write-off.
Although no tax deduction is allowed for the value of services you perform for a charitable organization, some deductions are permitted for out-of-pocket costs you incur while performing the services. This includes items such as:
1) Away-from-home travel expenses while performing services for a charity (out-of-pocket round-trip travel cost, taxi fares and other costs of transportation between the airport or station and hotel, plus lodging and meals).
2) 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).
3) If you use your car while performing services for a charitable organization you may deduct your actual unreimbursed expenses directly attributable to the services, such as gas and oil costs. Alternatively, you may deduct a flat 14¢ per mile for charitable use of your car. In either event, you may also deduct parking fees and tolls.
Keep in mind, no charitable deduction is allowed for a contribution of $250 or more unless you substantiate the contribution by a written acknowledgment from the charitable organization.
This presents a problem where you as a volunteer make a contribution on behalf of rather than directly to a charity. One way around this is for the charity to pay for the expenses, itself, and then be reimbursed by you. Always safeguard your deductions as follows:
(1) get written documentation from the charity about the nature of your volunteering activity and the need for related expenses to be paid.
(2) If you are out-of-pocket for substantial amounts, you should submit a statement of expenses and, preferably, a copy of the receipts, to the charity, and arrange for the charity to acknowledge in writing the amount of the contribution.
(3) You should 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.
Bottom line, just get out and serve!! Oftentimes the emotional and spiritual rewards outweigh the tax benefit, however, the write-off doesn’t hurt either.
Mark J. Kohler is a CPA, Attorney, Radio Show host and author of the book “Lawyers are Liars- The Truth About Protecting Our Assets”, and “What Your CPA Isn’t Telling You- Life Changing Tax Strategies”. He is also a partner at the law firm Kyler Kohler Ostermiller & Sorensen, LLP and the accounting firm K&E CPAs, LLP. For more information visit him at www.markjkohler.com.