Single Out Charitable Volunteers for Tax Breaks

Ken Berry for AccountingWeb writes: Do some of your clients serve on the boards of private foundations or work in the trenches for public charities? Whether they're jetting around the country to secure funding for a worthy cause or dishing out hot meals at a soup kitchen, charitable volunteers are entitled to deduct their unreimbursed expenses incurred on behalf of qualified charitable organizations. To provide more clarity in this area, the IRS has just posted a list of five tips for taxpayers who travel while working for charities during the summer months (see sidebar).

IRS Gives Five Tips to Volunteers

The IRS has offered the following advice to taxpayers who travel on behalf of charity (IRS Summertime Tax Tip 2013-05, July 12, 2013).

1. You must volunteer to work for a qualified organization. Ask the charity about its tax-exempt status. You can also visit IRS.gov and use theSelect Check tool to see if the group is qualified.

2. You may be able to deduct unreimbursed travel expenses you pay while serving as a volunteer, but you can't deduct the value of your time or services.

3. The deduction qualifies only if there is no significant element of personal pleasure, recreation, or vacation in the travel; however, the deduction will qualify even if you enjoy the trip.

4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can't deduct expenses if you only have nominal duties or don't have any duties for significant parts of the trip.

5. Deductible travel expenses may include air, rail, and bus transportation; car expenses; lodging costs; cost of meals; and taxi fares or other transportation costs between the airport or station and your hotel.

To learn more, the IRS advises taxpayers to see Publication 526, Charitable Contributions. The booklet is available online or by calling 800-TAX-FORM (800-829-3676).

What sort of expenses can taxpayers deduct? The list may be more extensive than many clients think. Here are several examples of deductible expenses that have been approved in the past:

• The cost of air, rail, bus, or taxicab fare spent while performing services for a charity are deductible. Furthermore, you may deduct meals and lodging expenses on a charitable trip. But remember, there can't be any significant element of personal pleasure, recreation, or vacation in the travel.
• If you use your own vehicle to drive to charitable events or functions, you can deduct the expenses attributable to those trips – gas, oil, insurance, and repairs – or use a flat-rate deduction of fourteen cents per mile (plus related parking fees and tolls).
• If you're required to wear a uniform or other special clothing during certain activities – such as troop leaders for the Boy Scouts or Girl Scouts – you may deduct the cost as long as it's not suitable for everyday wear). In addition, the cost of cleaning the clothing counts toward the deduction for miscellaneous expenses.
• Although you can't deduct basic landline or cell phone charges, additional costs for long-distance telephone calls are deductible. Similarly, you may write off the cost of a separate phone or fax line installed in your home solely for charitable activities.
• When you host a gathering at your home to promote charitable fundraising, you can deduct the cost as a charitable expense without regard to the usual 50 percent limit on entertainment deductions.
• You can deduct the costs associated with attending a convention on behalf of a charitable organization if you've been designated as an official delegate to the convention. This includes meals and lodging while you're staying at the convention.
• If you house a nonrelative foreign exchange student, you can deduct up to $50 per month of your expenses for each month the child attends school; however, the student must be residing in your home under a written agreement with a qualified charitable organization.
• A taxpayer can deduct the cost of paper, postage, and other out-of-pocket costs incurred while sending out mailings on behalf of a charity – even amounts spent on paper clips and staples.

Finally, the usual rules for charitable deductions apply to volunteers, including annual limits and the reduction of tax benefits for certain upper-income taxpayers. Keep these rules in mind when offering advice to clients.