Charitable Deductions For Volunteers
Our clients who work as volunteers for charities aren't motivated by tax breaks. Many probably don't even know that as itemizers they can deduct their unreimbursed expenses.
Volunteers may deduct unreimbursed expenses that are incidental to their volunteer work. So costs incurred in going from home to the charity's office (or other places where they render services), phone calls, postage stamps, stationery, and similar out-of-pocket costs are deductible as charitable donations.
Volunteers may deduct 14 cents per mile when using their vehicles to do volunteer work. This amount is fixed by statute and is not indexed for inflation. They may also deduct unreimbursed parking and toll costs. Volunteers can deduct actual allowable expenses for gas and oil (tolls and parking too) provided they keep proper records (e.g., credit card receipts, canceled checks, travel diary). However, insurance and depreciation on a volunteer's car aren't deductible.
If a volunteer travels and must be away from home overnight, reasonable payments for meals and lodging as well as transportation costs are deductible. Out-of-pocket costs at a convention connected with volunteer work are deductible only if the volunteer is chosen to represent the church, group, alumni body, etc.
To deduct unreimbursed expenses of $250 or more while providing volunteer services to a charity, the volunteer must substantiate the deduction with a written receipt and have the receipt in hand before filing his or her income tax return. If the return is filed after the due date (or after an extended due date), the receipt must nevertheless have been in the volunteer's hand by the due date (plus any extensions).
For cash gifts, regardless of the amount, record-keeping requirements are satisfied only if the volunteer maintains as a record of the contribution, a bank record or a written communication from the donee showing the donee's name and the date and amount of the contribution. A bank record includes canceled checks, bank or credit union statements and credit card statements. Bank or credit union statements should show the name of the charity and the date and amount paid. Credit card statements should show the name of the charity and the transaction posting date. The record-keeping requirements will not be satisfied by maintaining other written records. Donations of money include those made in cash, by check, electronic funds transfer, credit card and payroll deduction.
A volunteer who has unreimbursed expenditures of $250 or more while providing volunteer services to a charity is treated as having obtained a receipt from the charity (and thus may deduct those expenses) if the volunteer has adequate records for his or her volunteer expenses (those generally required to substantiate deductions) and obtains an abbreviated receipt from the charity.
The receipt must contain: (1) a description of the volunteer's services; (2) a statement whether the charity provided any goods or services in exchange for the unreimbursed expenses; (3) a description and good faith estimate of the value of any goods or services provided (if the goods or services provided consist of any intangible religious benefits, the receipt must so state); and (4) if no goods or services were provided, the receipt must so state.
The IRS says that if a donor makes a single contribution of $250 or more in the form of unreimbursed expenses, e.g., out-of-pocket transportation expenses incurred in order to perform donated services for a charity, then the donor must obtain the written acknowledgment described above from the organization. Separate contributions of less than $250 are not subject to the "$250 or more" substantiation requirements even if the sum of the contributions to the charity during a taxable year equals more than $250.
Range of Expenses
The volunteer may not deduct travel expenses as charitable gifts if there's a significant element of personal pleasure, recreation or vacation in the travel. But enjoying volunteer work doesn't rule out a deduction. For example, an on-duty troop leader for a tax-exempt youth group who takes children belonging to the group on a camping trip may deduct qualifying travel expenses even if he or she enjoys the trip or likes supervising children.
The volunteer may also deduct unreimbursed expenses incurred in using personal property while performing volunteer work (e.g., the cost of printing pictures from a camera). However, insurance, depreciation and the cost of the equipment aren't deductible.
And the volunteer may not deduct the value of his or her services. For example, suppose the prevailing rate for the services rendered is $100 per hour. If for 100 hours during the year the volunteer renders those services, the $10,000 value of the services isn't deductible. Although deductions are allowed for property gifts, the IRS doesn't consider services "property." Also, the use of a volunteer's home for meetings is not a "property contribution."