10 Tax Tips for VolunteersPosted: July 26, 2022
Donating time to a charity can be a rewarding experience — both for you and people (or animals) who benefit from the organization’s mission. But your efforts may also provide you with some well-deserved tax breaks if you itemize deductions on your tax return. Although you can’t deduct the “value” of your services, here are 10 other tax-saving opportunities that you may be able to take advantage of.
1. Unreimbursed Vehicle Expenses
If you take short-distance trips for the charity in your personal vehicle — say, to attend meetings, make deliveries or pick-ups or run other errands for the organization — you can deduct the portion of your vehicle expenses attributable to your charitable travel. These expenses include gas, oil, repairs, insurance and depreciation.
Tracking all of these expenses requires in-depth recordkeeping under the strict substantiation rules administered by the IRS. In lieu of this inconvenience, you can simply claim a flat rate deduction of 14 cents per mile (plus charity-related tolls and parking fees).
Important: Due to today’s inflated gas prices, you may fare far better from a tax standpoint with the actual expense method than you do with the standard mileage rate.
2. Unreimbursed Travel Expenses
Beyond traveling in your personal auto, you can deduct other transportation costs incurred on behalf of charity, including round-trip airfare and rail or bus fare to attend meetings and events. This also extends to local transportation, such as taxicab fare or Uber or Lyft fees, while you’re at the distant location.
Furthermore, you can deduct the cost of qualified meals while you’re away from home. The usual 50% limit on business meal expenses doesn’t apply this year. You can deduct 100% for food and beverages provided by restaurants in 2022.
3. Event Tickets Priced Above Market Value
Usually, you donate cash to charity without receiving anything of value in exchange. In those cases, you can deduct the full amount. But sometimes you might pay more to the charity than the benefit you receive in return. For example, you may attend a fundraising event, such as dinner or a gala for a specific cause. In this case, your deduction is limited to the difference between the cost and the fair market value of the benefit received.
Let’s say you and your spouse buy two tickets for a dinner that benefits a local animal rescue organization at $250 apiece. The actual market value of the meal is $100 a plate. Therefore, you can deduct the $300 difference ($500 cost for two tickets minus $200 market value). Be sure to obtain written documentation from the charity for amounts above $75.
4. Clothing or Uniforms Purchased for Charitable Functions
If you’re required to wear special clothing while performing charitable duties — for example, a Girl Scouts uniform or an event-specific sweatshirt with the charity’s name — you can deduct the cost of the clothing. But you can’t write off the costs of clothing items that are suitable for regular wear. For instance, no deduction is allowed for a tuxedo or dress purchased for attending a charitable gala.
Previously, you could also deduct cleaning and maintenance costs of special clothing as a miscellaneous expense, subject to an overall limit of 2% of adjusted gross income (AGI). But the deduction for miscellaneous expenses is suspended for 2018 through 2025.
5. Event-Hosting Costs
If you hold a fundraiser for the charity at your home — such as a picnic or a silent auction — all of your expenses are deductible. As with charitable meals, there’s no 50% limit in 2022 on write-offs for meals (provided by restaurants) during charitable functions.
Note that a business can no longer deduct any of its entertainment expenses. This write-off was permanently eliminated in 2018. But the crackdown doesn’t extend to entertainment at your home fundraiser.
6. Use of Communication Devices
While you can’t deduct your basic telephone or cellphone expenses, you’re allowed to write off the cost of long-distance calls made for a charity. You also may be able to deduct a second landline, scanner or fax installed in your home solely for charitable purposes. Similarly, you may deduct charity-related costs attributable to use of an iPad or other electronic device.
Also, if you use U.S. mail or other delivery services like FedEx or UPS, you can deduct those costs relating to charitable endeavors.
7. Supply Costs
If a charity runs short on supplies — such as paper towels, paperclips and even dog treats — you may use some of your own money to pick up the slack. For instance, you might incur costs for making signs or providing other displays.
There’s no limit on deductions for this category, but it generally encompasses items of a relatively small cost. Other special rules apply to larger donations of property.
8. Expenses Related to Attending a Charitable Convention
Normally, you can’t deduct costs incurred for charitable travel if there’s a significant element of personal pleasure or recreation. However, the tax law allows you to write off expenses associated with attending a convention on behalf of charitable organization when you’re an official delegate. This includes meals and lodging at the convention site.
Of course, any personal expenses incurred while you’re at the convention — such as golfing or snorkeling fees, the cost of a massage or admission to tourist attractions — are completely nondeductible.
9. Foreign Exchange Student Hosting Expenses
If you agree to have a foreign exchange student stay at your home during the school year, you can deduct up to $50 per month of your expenses for each month that the child attends school. The student must in the 12th grade or lower and be living in your home under a written agreement with a qualified charity. The $50-per-month limit is relatively low — especially given the high cost of groceries today — but it’s better than nothing.
Important: You won’t qualify for this tax break if the student is a relative. For example, you get no deduction if your cousin from Italy or niece from China stays with you.
10. Donations to Treat Underprivileged Youth
Do you work with a charity aiming to reduce juvenile delinquency? You can deduct amounts paid to enable underprivileged youths to attend events that they normally couldn’t afford, such as sporting contests, concerts, movies or dinners. This can turn into a sizeable deduction.
Important: The youths must be selected by the charity. You don’t get to choose who comes with you.
For More Information
Sometimes it pays to do the right thing. These are just ten examples of deductible expenses that volunteers may incur while helping out a charity. Your tax advisor can examine your records to find other deductions that may be appropriate for your situation.