Three volunteers walk into a bar–sorry, wrong article. Three volunteers work to help others and incur out-of-pocket expenses in doing so. Which volunteer gets a charitable income tax deduction?
Meet the Three Volunteers
Volunteer 1 – Homer owns a condo and serves as a non-paid board member for his condo association. He attends monthly meetings and uses some personal office supplies for mailings to other condo owners.
Volunteer 2 – Scarlett works four hours each week for the Red Cross filling in for the office assistant who is paid $10 per hour. Scarlett also hires a baby-sitter to care for her children while she volunteers her time.
Volunteer 3 – Candy is a nurse’s aide at a hospital ten miles from her house. The hospital requires that she wear a striped uniform while she works at the medical center. The uniform is not suitable for everyday use. Candy wrote a check to pay for the uniform and kept her receipt.
Volunteer 1 – Homer
Homer cannot deduct any out-of-pocket expenses for his work with the condo association. Charitable work that is eligible for an income tax deduction must be for a qualified organization: a governmental agency, a church, or a charity. Every charity has a letter from the IRS that says it is a 501(c)(3) entity. Examples of charities include the Red Cross, the United Way, hospitals, colleges, and museums.
The condo association may be a not-for-profit entity and exempt from income tax, but it is not a charity. Examples of other organizations that are not charities include chambers of commerce, labor unions, social clubs and sports clubs.
Volunteer 2 – Scarlett
Scarlett volunteers for the Red Cross, which is a charity, but the value of her work cannot be deducted. The value of Scarlett’s work is $10 per hour, as she fills in for the office assistant who earns this hourly wage. The tax law allows charitable deductions for the giving of money (including out-of-pocket expenses) and tangible things. However, it doesn’t allow a charitable deduction for the giving of services.
The cost of the childcare is also not a charitable deduction because it is considered personal. Charitable deductions must be solely for the benefit of the charity–not personal.
Volunteer 3 – Candy
Candy can deduct her out-of-pocket expenses for her volunteer work at the hospital, which is a charity. The 20-mile roundtrip traveling costs can be deducted: either the cost of gas or 14 cents for each mile. If she chooses the latter, Candy may deduct $1.40 each way, $2.80 for the roundtrip. She can also deduct parking fees and tolls.
The cost of the striped uniform can also be deducted because Candy can wear it only when she does her charity work at the hospital. In addition, Candy kept her receipt for the uniform and has her canceled check as proof of payment.
If you are a volunteer, see IRS Publication 526, Charitable Contributions, for more information on this topic.