Tax Breaks for Charity Work
Income Tax Deductions for Charitable Contributions
As you may already know, the IRS provides tax deductions for charitable contributions that you make to a qualified organization. However, it is not just direct cash and property donations that are tax-deductible. If you perform unpaid volunteer work for a charity, then you may also be eligible to deduct certain expenses.
What You Cannot Deduct
According to the IRS, there are some charitable expenses that cannot be deducted. These include the following:
- You cannot deduct the cost of your time or lost wages.
- You cannot deduct any expenses that have been reimbursed.
- Except for direct travel expenses, you cannot deduct any personal expenses. This includes local meals for yourself and any other incidental expenses.
- You cannot deduct the cost of childcare while you volunteer.
- You cannot deduct any expenses for charity work that you do for an organization that the IRS doesn’t recognize as a qualified charitable organization.
READ: Types of Tax Deductions
Charitable Expenses That You Can Deduct
Most travel expenses for charity work are tax-deductible. This includes airfare and hotel expenses. Meals are also deductible if the travel lasts overnight. Similar to normal business expenses, you can only deduct travel expenses if the trip does not have a significant pleasure component. If your charity travel takes you to a location that is typically associated with vacationing, then you can expect extra scrutiny from the IRS. The rules regarding this can be tricky, and if there is any question then you may want to seek professional tax help.
The most common tax deduction for charity workers is car expenses. You can deduct the cost of gas while doing work for a qualified charitable organization, as well as any parking fees and tolls. To deduct gas expenses, you will need to keep your gas receipts. If you don't want to keep receipts, you can keep records of your mileage instead. In the absence of gas receipts, the IRS will allow you to deduct 14 cents per mile. Keep in mind, the mileage must be only for charity work and not personal travel.
It’s important to note that deducting car travel for charity work is different than deducting car travel for business work. For charity work, you can deduct the actual cost of gas and oil but you cannot deduct depreciation, insurance, or any other wear and tear.
Cost of Materials
If you purchase materials that become the property of a qualified charity or its beneficiaries, you may be able to deduct the costs of those materials. For example, if you are running an after-school tutoring program and you purchase books for kids to read, then the cost of those books may be tax-deductible if they become the property of the charity or the kids.
The cost of entertainment on behalf of a qualified charity is a deductible expense. For instance, if you take a potential big donor out to dinner to discuss the charity, the cost of the meal is tax-deductible (not including your portion).
Tax deductions for entertainment expenses can also extend to the primary beneficiaries of an organization. For example, if you take a group of underprivileged youth, selected by a qualified charity, to a special event (like a concert) then you can deduct the cost of their tickets. However, you cannot deduct the cost of your own ticket.
Cost of Uniforms
If you are required to wear a uniform while volunteering at a qualified charitable organization, you can deduct the cost of the uniform and its maintenance (such as dry cleaning). Note that this only applies if the uniform is required and cannot be worn outside of your volunteer efforts.
Documentation Necessary to Claim Tax Deductions
If you want to take advantage of these tax breaks, you will need to have the proper documentation in place. You should keep a written record of all the charitable work that you do for an organization — including dates, times, and a description of the duties you performed.
Make sure to obtain a letter from the qualified charity describing your duties and where they will take place. This will help you substantiate the tax deduction for any travel expenses. For travel, the charity should provide you with a document explaining your duties on the trip (e.g., the times of the day that you are performing work for the charity). You will need to keep receipts for airfare and hotel costs, as well as any travel meals you are deducting. Also remember to keep your gas receipts or mileage records so you can deduct car travel.
Where to Claim Deductions for Charitable Expenses
Charitable contributions must be made to qualified organizations in order to be tax-deductible. In order to take advantage of these tax breaks, you must itemize deductions on Form 1040, Schedule A (Itemized Deductions).
For a list of qualified charitable organizations, please refer to the Exempt Organizations Select Check, the IRS’ online search tool.
For more information about tax deductions for charity work, see IRS Publication 526 (Charitable Contributions).