Can I deduct volunteer time?

April 18, 2022 by Carolyn Richardson, EA, MBA
Group of Volunteers

When it comes to charity, many people contribute money to causes they deem worthy or which they believe promote and encourage things they believe in. For some people, that may be their church or school and, for others, it may be worldwide causes that protect wildlife or help in disasters. While money is always appreciated by organizations, in many cases, it may not be the critical component of their work. Volunteers can be critical to their mission.

If you volunteer for an organization, do you get a tax deduction for your time or talent? For example, if you are an accountant by profession and volunteer to do the books for your church, can you take a deduction for the amount that you would normally charge a client for bookkeeping? What if you are a professional contractor, and you help build a home for Habitat for Humanity? Or a nurse helping in a disaster for the Red Cross?

Unfortunately, the value of your time or talent cannot create a tax deduction. Regardless of your professional background, or what your normal rate is for doing bookkeeping, when you are using this talent or time to provide uncompensated services to a nonprofit organization, you cannot claim a deduction for the value of that time or talent. Your time and talent are worthless to the IRS when you are using it to volunteer. For example, John is a CPA, and he normally charges $200/hour for bookkeeping services provided to his clients. John also works as treasurer for his local Boy Scout troop, and this normally takes about 100 hours per year. John cannot deduct, as a charitable contribution, the $20,000 he would normally charge.

This example falls under what I refer to as the "no income/no deduction" rule. The volunteer is forgoing earning taxable income by contributing their services to the Boy Scouts instead. Since there is no "income" associated with the provision of these services, there is no corresponding allowable deduction.
 

Partial Use of Property


Another similar situation arises when a taxpayer lets a nonprofit organization use something they own, free of charge. A common mistake taxpayers make is thinking that they can take a deduction for letting their nonprofit group use a shed, room, portion of their garage, etc. In nearly every case, they are letting the organization use this space for free or at a greatly reduced rate. The logic goes "I could be renting this out for $100/month, but I'm letting them use it for nothing so I'm going to deduct the $100 per month as a charitable contribution."

However, this type of "donation" is considered to be "the right to use property" and is specifically not deductible under the Code and Regulations. This is because it is considered to be the contribution of less than an entire interest in the property, and contributions of a partial interest in property are not deductible. For example, Marvin owns and operates his own company, and operates this out of a large warehouse that he owns. The warehouse is divided into several spaces, including one room that Marvin allows his local shooting club the use of to store equipment. If Marvin were to rent this space to someone else, he would charge them $200 a month for rent. Marvin cannot take a charitable contribution for partial use of his property by the shooting club.
 

Out-of-Pocket Expenses


Although you cannot deduct the value of the services you may provide to the organization, you may be able to deduct some of the amounts you pay in providing those services. To be deductible, the expenses must be unreimbursed, directly related to providing the service, incurred only because you were providing the service, and not in the nature of personal, living, or family expenses.

Also, if a single expense exceeds the $250 threshold for additional documentation, you need to have that acknowledgement from the organization verifying the amount of the expense. This was clarified in a 2011 Tax Court case (Van Dusen v. Commissioner, 136 T.C. No. 515, 136 T.C. No. 25 (June 2, 2011)). The case involved a woman who was deducting her unreimbursed volunteer expenses while caring for foster cats in her home. The taxpayer was deducting veterinary services, pet supplies, cleaning supplies, and household utilities in relation to services she provided to a local feral cat group. The court allowed her all the expenses which were below $250 based on her records — she was an excellent recordkeeper and had receipts for everything, and took only a percentage of those based on owning two of her own cats in addition to the dozens of foster cats she cared for during the tax year. However, some veterinary bills that exceeded $250 in one trip were disallowed because she did not obtain the necessary written acknowledgement from the feral cat organization, as required under the income tax regulations (Sec. 1.170A-13(f)(10)).

Out-of-pocket expenses that are deductible would include the cost of running an office, such as postage, envelopes, and paper. It can also include the cost of oil and gas to attend events at which you are providing services (more on that in a minute). It may include travel if you are performing services for an organization, but only if there is no significant element of personal pleasure, recreation, or vacation in the travel (we'll discuss this in a minute, too).

For example, if you are volunteering as an officer for an organization and incur postage expenses for mailing reports to the parent organization, you can deduct the cost of the postage and any office supplies used in the creation of those reports, such as paper and envelopes. However, if you e-mail the report to the main office using your personal e-mail account, you cannot deduct the cost of your internet provider since the charitable use is minimal, and the cost of having internet service at home would be considered a personal expense.

Car expenses: If you need to drive your car to provide services to the organization, you can either deduct the actual cost of gas and oil directly related to the use of the vehicle for that service, or claim a mileage deduction at the rate of 14 cents per mile. The cost of parking and tolls is also deductible. If you want to use the mileage rate, you must maintain a mileage log of the date you provided the service, the service provided, and the mileage incurred. I normally recommend to anyone wishing to use the actual cost of gas, that they fill their tank just before leaving on their trip, and then refill it again immediately after returning home — regardless of whether they need gas or not. This will give you the actual gas cost of making that specific trip. The IRS is not particularly lenient when it comes to "ballpark" estimates of mileage incurred, and will generally not allow this deduction if good records are not maintained.

The key to being able to deduct out-of-pocket expenses is that the expense must be incurred in providing actual services to the organization. Even if you enjoy providing those services, that does not necessarily disqualify you from taking a deduction; however, it may have an impact in some cases.

For example, if you volunteer as a docent at a museum, you generally must perform those services at the museum itself. The mileage incurred to get to the museum would be a deductible volunteer expense at the rate of 14 cents per mile.

Travel: Generally, you can deduct the cost of travel incurred while you are away from home (meaning an overnight stay) performing services for a charitable organization. Travel costs include airfare or rail or bus tickets, meals and lodging, out-of-pocket expenses for your car, and taxis and other transportation between the airport, train or bus station and your hotel. However, the travel expenses are only deductible if there is no significant element of personal pleasure, vacation, or recreation involved in the travel. In order to deduct travel, you must be on duty in a genuine and substantial sense throughout the trip. If the duties are only nominal, or if for a significant part of the trip you do not have any duties, the travel is not deductible.

For example, Lance is active in an organization that holds an annual three-day convention for the officers of the organization. They also need volunteers to help organize and run the meeting. In 2021, Lance volunteers to help with the meeting, which is being held in Orlando, Florida. Lance must pay for his airfare, hotel, and meals during the convention, but does receive $200 per day from the organization as partial reimbursement for his expenses. During the convention, Lance works hard all day, registering participants, coordinating with the caterers for the coffee service and snacks, and directing other volunteers. On the last day of the trip, he goes to Disney World with some of the other attendees. Lance can deduct the cost of his travel expenses, reduced by the per diem allowance he received, but he cannot deduct the cost of his Disney World admission. Lance should also get a letter from his organization acknowledging his payment of the travel costs over and above his reimbursement.

Keep in mind that, in order to deduct your volunteer out-of-pocket expenses, you must be able to itemize your deductions. While this type of thing is typically paid in cash, it is not a “cash” donation for the $300/$600 nonitemized charitable donations allowed in 2020 and 2021.

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Carolyn Richardson, EA, MBA
Learning Content Managing Editor

 

Carolyn has been in the tax field since 1984, when she went to work at the IRS as a Revenue Agent. Carolyn taught many classes at the IRS on both tax law changes and new hire training. In 1990, she left the IRS for a position at CCH, where she was a developer on both the service bureau software and on the Prosystevm fx tax preparation software for nearly 17 years. After leaving CCH she worked at several Los Angeles-based CPA firms before starting at TaxAudit as an Audit Representative in 2009. Carolyn became the manager of the Education and Research Department in 2011, developing course materials for the company and overseeing the research requests. Currently, she is the Learning Content Managing Editor. 


 

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