Doing Good and Getting a Tax Break for It

According to the federal government, in 2013 more than a quarter of all people in the United States did some volunteer work. To what extent can you write off costs related to your volunteer activities?

Itemizing required. If you have deductible costs, you can use them for tax advantage only if you itemize your personal deductions. High-income taxpayers lose a portion of their itemized deductions due to a reduction in these write-offs when modified adjusted gross income exceeds a threshold amount. If you’re in this category, you may not get the full benefit of your deductible charity-related costs even though you itemize.

Deductible costs. You can deduct your out-of-pocket costs related to your charitable work. Here are some examples of deductible costs:

• Driving for charity. You can deduct 14 cents per mile driven for your charity work. This includes mileage to and from your home to the organization’s location (e.g., a hospital or fire station for volunteer firefighter) or other charity site (e.g., the home you’re working on for Habitat for Humanity). You must keep a good record of the mileage and purpose of each trip.
• Foster care costs. Unreimbursed costs for food, clothing, and other care expenses incurred as a foster parent or provider are deductible if you have no profit motive and you are not intending to adopt the child you’re caring for.
• Travel for charity. Meal, lodging, and travel costs on a trip away from home for an organization are deductible. Deductible costs are those for serving as an official delegate to a convention of a charitable organization. Nondelegates cannot deduct travel costs but can deduct any direct out-of-pocket costs on behalf of the organization. Whether travel costs for activities other than conventions are deductible depends on the nature of the work; too much personal benefit nixes any deduction for costs. For example, a doctor who spends her summer vacation on an Indian reservation to provide medical services on behalf of an IRS-recognized organization likely can deduct travel costs, but someone who goes on an archeological dig in a tourist area likely cannot.
• Uniforms. If you are required to wear a uniform (e.g., a candy striper uniform in a hospital), you can deduct the cost.
• Unreimbursed costs. If you buy materials and supplies (e.g., stamps) used for charity, the cost is deductible.

Substantiating required. Obviously, you need proof of any cost you deduct. If out-of-pocket costs are $250 or more, you also need a written acknowledgment from the organization you’re benefiting. And, as mentioned earlier, if you use your vehicle for charity work, keep a log (on paper or with an app) to document your mileage.

Nondeductible costs. Not every cost you incur on behalf of your charity work is deductible. These costs are nondeductible:

• Babysitting. Even though you pay someone to look after your child so that you can work for charity, the cost is nondeductible.
• Rental value of a home donated for a charitable use. If you have a vacation home that you allow a charity to use for fundraising (e.g., raffling off a two-week stay in your ski chalet or beachfront condo), you cannot deduct what the home could have been rented for.
• Value of your work on behalf of a charity. The time and effort you put into charity work is on you and is not deductible. For example, an attorney who reviews contracts for a charity at no charge cannot deduct her usual hourly rate for this work.

Conclusion

Charity work is its own reward. But it’s nice to know that you can save taxes as well.

Source: http://www.bls.gov/news.release/volun.nr0.htm