Is there anything more rewarding than giving back to your community? Whether it’s volunteering your time or making a charitable donation, knowing that your efforts are helping a person or group in need is a feeling that’s hard to top. In addition to the feel-good reasons, did you know that there may be tax benefits associated with your good deeds?
Every year, millions of Americans volunteer. In fact, according to the Bureau of Labor Statistics, “About 62.6 million volunteered through or for an organization at least once between September 2014 and September 2015.” Americans are also very generous with their money, as evidenced by the $358.38 billion that Giving USA estimates was given to charity in 2014 (including individual giving, foundation giving, bequest giving and corporate giving).
One thing is certain: Americans spend a lot of time and money giving back. Make sure you take advantage of some of these tax benefits if you qualify for them.
If you’re hitting the road to volunteer, you’re in luck. Keep track of gas and oil used or the number of miles your vehicle accumulates that are directly associated with your volunteer efforts. Be sure to record any toll or parking fees, too. If you use transportation options such as a city bus, an Uber or a train, make sure you keep your receipts, as you can deduct all of these costs.
Does your volunteer time include a lengthy trip? If so, airfare, hotel fees and meal costs all need to be tracked so you can deduct those costs, too.
Keep in mind that to count your experiences as volunteer time, you can’t gain significant personal pleasure. Is it good if you enjoy the type of volunteering you do? Absolutely! Just keep in mind that if you want to count your trip toward your volunteer-related travel expenses, you can’t sign up to volunteer during an extravagant trip only to spend minimal time volunteering and most of the time exploring.
Small but Significant Expenses
You probably don’t even think about some of the things you spend money on while volunteering. For example, if you’re a board member of an organization, you may spend a lot of time on the phone setting up meetings. Any additional phone charges you accrue due to calls made for volunteering purposes may be deducted. However, if you have a plan with unlimited minutes, no deductions can be made. If you’re creating fliers or sending out packets of information via mail, keep track of the money you spend on postage and supplies, as these are further examples of charges you can deduct.
Are you required to wear a uniform while volunteering? If so, you can deduct the cost to purchase the uniform and any costs associated with cleaning it.
However, the uniform can’t be clothing that you can wear for everyday use. For example, if you’re required to wear jeans and a T-shirt, you can’t go out and buy a new pair of jeans and a T-shirt and deduct the cost.
Sometimes it’s difficult to find time to volunteer. In these cases, it may be easier to make a cash donation to a worthy cause. If you choose this route, you need documentation to prove how much you donated. Qualifying documents include a canceled check, a bank statement or a receipt from the charity. Keep in mind that if you donate $250 or more, a written acknowledgment from the charity is required.
Cash donations become tricky if you receive any kind of benefit in return. For example, if you pay $175 to participate in a charity golf event, you must subtract the cost of participating. So if your $175 includes a round of golf that normally costs $50 and a dinner that normally costs $40, you’ll need to subtract $90 from your original $175, making only $85 deductible.
If you’re anything like me, you probably have a shirt or 12 that you no longer wear stashed in your closet. If they’re in good condition, you can donate them to your local Salvation Army or another charitable thrift store. When donating clothes, your tax deduction is calculated by determining the value of the clothes now, not what you originally paid for them. For example, say you paid $120 for two pairs of jeans and $100 for three shirts you bought three years ago. If you donate the jeans and shirts, you can’t deduct $220. Instead, you can only deduct the current fair market value of your donation. In most cases, this will be significantly less than what you originally paid.
Other Things to Note
- When volunteering, you can’t deduct the hours you spent volunteering. You can only deduct the expenses of any supplies you purchased to do that work.
- If you decide to make a contribution to a charity, make sure you’re donating to a qualified organization if you want to take advantage of the tax incentive. A common misconception is that all nonprofit organizations fit this category. Some do, but some don’t. To verify, search for the organization on the IRS website.
- Blood donations don’t qualify for a tax deduction.
As with anything that relates to your taxes, be sure to speak with a tax professional if you have any questions.
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