Have you done volunteer work for a charitable organization? If your answer is yes, you have an excellent opportunity to lower your tax bill. But, only if you track your out-of-pocket expenses.
Here’s what we mean. To qualify for a deduction, your unreimbursed expenses must relate directly to the charity. You must also itemize your deductions on your tax return. Here’s five things to keep in mind:
1. Charity-related out-of-pocket expenses may be deductible.
As a volunteer, you may deduct the cost of postage stamps, supplies, and other out-of-pocket costs incurred in your volunteer work.
If you’re required to wear a uniform, the cost of buying uniforms is deductible if they’re unsuitable for everyday wear.
2. Time volunteered isn’t deductible.
The cost of your time – no matter how valuable it may be – isn’t deductible. This is true even if you’d normally get paid for the type of service you contribute.
For example, accountants who perform free consulting for charities can’t deduct what they’d normally charge for their services.
3. The standard mileage rate for volunteers who use their own cars is 14 cents per mile.
Alternatively, you may deduct your actual unreimbursed expenses for gas and oil, but not maintenance, depreciation, or insurance. Either way you choose, related parking fees and tolls are deductible.
4. Overnight travel for volunteer work may be deductible.
If you travel overnight for charitable purposes, your expenses are deductible as long as they’re reasonable. They can’t be connected with personal activities or any element of recreation.
5. Special rules apply to conventions.
Travel and other out-of-pocket expenses related to your attendance at a convention for volunteers are deductible. But only if you’ve been chosen to represent the organization.
Finally, remember that it’s up to you – the volunteer – to support your deductions. If you take these deductions, be prepared to show the IRS the connection between the costs you claim and the volunteer work you performed. Keep records!
Have questions about how charitable work impacts your taxes? Let’s talk!