Volunteer Management Tip Sheet IRS Deductions for Volunteer Services

Size: px

Start display at page:

Download "Volunteer Management Tip Sheet IRS Deductions for Volunteer Services"

Violet Hudson
8 years ago
Views:

1 Volunteer program managers should be aware of the deductions volunteers can take off their U.S. taxes. This tip sheet is not a substitute for advice from an accountant. Volunteers who want more information should be directed to the IRS website at The website has a publication titled Publication 526, Charitable Contributions that gives further information. Qualified Organizations Volunteers can deduct contributions only if they volunteer for a qualified organization. Most organizations other than churches and governments must apply to the IRS to become qualified. Check with your accounting office to see if your organization is considered qualified, or check IRS Publication 78. Qualified organizations may be a community chest, corporation, trust, fund, or foundation. It must be organized and operated only for one or more of the following purposes: Religious Charitable Educational Scientific Literary The prevention of cruelty to children or animals Certain organizations that foster national or international amateur sports competition also qualify Most 501(c)3 organizations usually fall under these categories Contributions Volunteers Can Deduct Generally, volunteers can deduct money or property contributions that are made to, or for the use of, a qualified organization. A gift or contribution is considered for the use of a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. The contributions must be made to a qualified organization and cannot be for use by a specific person. Contributions From Which Volunteers Benefit If a volunteer receives a benefit as a result of making a contribution to a qualified organization, they can deduct only the amount of their contribution that is more than the value of the benefit they receive. If a volunteer pays more than fair market value to a qualified organization for merchandise, goods, or services, the amount they pay that is more than the value of the item can be a charitable contribution. For the excess amount to qualify, it must be paid with the intent to make a charitable contribution. 1 of 5

The website has a publication titled Publication 526, Charitable Contributions that gives further information.

2 Expenses Paid for Student Living With Volunteers Volunteers may be able to deduct some expenses of having a student live with them. They can deduct qualifying expenses for a foreign or American student who: Lives in the volunteer s home under a written agreement between them and a qualified organization as part of a program of the organization to provide educational opportunities for the student Is not the volunteer s dependent or relative Is a full-time student in the twelfth or any lower grade at a school in the United States Volunteers can deduct up to $50 a month for each full calendar month the student lives with them. Any month when all three above conditions are met for 15 or more days counts as a full month. Out-of-Pocket Expenses in Giving Services Volunteers may be able to deduct some expenses they accrue in giving services to a qualified organization. The amounts must be: Unreimbursed Directly connected with the services Expenses they had only because of the services they gave Not personal, living, or family expenses Car Expenses Volunteers can deduct unreimbursed out-of-pocket expenses, such as the cost of gas and oil that are directly related to the use of their car in giving services to a charitable organization. Travel Generally, volunteers can claim a charitable contribution deduction for travel expenses necessarily incurred while they are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. The deduction for travel expenses will not be denied simply because volunteers enjoy providing services to the charitable organization. Even if they enjoy the trip, they can take a charitable contribution deduction for their travel expenses if the volunteers are on duty in a genuine and substantial sense throughout the trip. Deductible travel expenses Air, rail, and bus transportation Out-of-pocket expenses for the volunteer s car Taxi fares or other costs of transportation between the airport or station and hotel Lodging costs The cost of meals Because these travel expenses are not business-related, they are not subject to the same limits as business related expenses. Go to for more information about Travel Expenses. 2 of 5

the organization to provide educational opportunities for the student Is not the volunteer s dependent or relative Is a full-time student in the twelfth or any lower grade at a school in the United

3 Contributions Volunteers Cannot Deduct There are some contributions volunteers cannot deduct, and some contributions they can only deduct a portion of. Volunteers cannot deduct as a charitable contribution: Donations to a specific individual, including contributions to individuals who are needy or worthy Donations to a nonqualified organization The part of a contribution from which a volunteer receives or expects to receive a benefit The value of a volunteer s time or services Volunteer s personal expenses Appraisal fees Certain contributions of partial interests in property Value of Time or Services Volunteers cannot deduct the value of their time or services, including: Blood donations to the Red Cross or to other blood banks The value of income lost while a volunteer works as an unpaid volunteer for a qualified organization Contributions of Property If a volunteer contributes property to a qualified organization, the amount of their charitable contribution is generally the fair market value of the property at the time of the contribution. However, if the property has increased in value, they may have to adjust the amount of their deduction. Contributions Subject to Special Rules Special rules apply if volunteers contributed: Property subject to a debt A partial interest in property A future interest in tangible personal property Find out more at 3 of 5

part of a contribution from which a volunteer receives or expects to receive a benefit The value of a volunteer s time or services Volunteer s personal expenses Appraisal fees Certain contributions

4 When Volunteers Can Deduct Volunteers can deduct their contributions only in the year they actually make them in cash or other property (or in a succeeding carryover year, as explained under How To Figure Your Deduction When Limits Apply). This applies whether the volunteer uses the cash or an accrual method of accounting. Time of making contribution Usually, volunteers make a contribution at the time of its unconditional delivery. Limits on Deductions If a volunteer s total contributions for the year is 20 percent or less of their adjusted gross income 1, they do not need to read this section because the limits discussed here are not applicable. The amount of a volunteer s deduction is limited to 50 percent of their adjusted gross income, and may be limited to 30 percent or 20 percent of their adjusted gross income, depending on the type of property they give and the type of organization they give it to. The out-of-pocket expenses volunteers spend performing services for a charitable organization, which qualify as charitable contributions, are subject to the limit of the organization. For example, the 50 percent limit applies to amounts volunteers spend on behalf of a church, a 50 percent limit organization. These amounts are considered a contribution to a qualified organization. 1 Adjusted Gross Income - the amount of taxable income that remains after certain allowed business-related deductions such as alimony payments, contributions to Keogh retirement plans, and in some cases, contributions to an IRA are subtracted from an individual s gross income. Adjusted gross income and gross income will be the same for many taxpayers. 4 of 5

Time of making contribution Usually, volunteers make a contribution at the time of its unconditional delivery.

5 How Volunteers Can Get Tax Help Volunteers can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. By selecting the method that is best for a volunteer, they will have quick and easy access to tax help. Internet Volunteers can access the IRS website 24 hours a day, 7 days a week at Publication 526, Charitable Contributions, should answer any additional questions volunteers may have about deductions. E-file Access commercial tax preparation e-file services available for free to eligible taxpayers. Help Line If volunteers are unable to find a specific answer, they can call the IRS help line at for an answer. The help line can also advise volunteers of free tax preparation sites in their community call. Fax Volunteers can get over 100 of the most requested forms and instructions 24 hours a day, 7 days a week, by fax. They can call from their fax machine. Follow the directions from the prompts. To order forms, simply enter the catalog number for the needed form. The items they request will be faxed to the fax number identified by the volunteer. Mail Volunteers can send their order for forms, instructions, and publications to: the National Distribution Center, P.O. Box 8901 Bloomington, IL , and receive a response within 10 workdays after their request is received. Effective February 28, 2005, the IRS consolidated the distribution center operations into one central location. CD-ROM for tax products Volunteers can order IRS Publication 1796, Federal Tax Products on CD-ROM, and obtain: Current-year forms, instructions, and publications Prior-year forms and instructions Frequently requested tax forms that may be filled in electronically, printed out for submission, and saved for record keeping Internal Revenue Bulletins 5 of 5

gov Publication 526, Charitable Contributions, should answer any additional questions volunteers may have about deductions.

Step 1 - Determine Eligibility

Step 1 - Determine Eligibility For a car donation to be eligible for a tax deduction, it must be made solely for charitable or public purposes by an individual who will itemize deduction on Schedule A