An email from a former co-worker (who I recently ran into coincidentally after not seeing each other for about 20 years) brought up an interesting tax issue.
Here is the pertinent portion of the email –
“My wife is raising a puppy for The Seeing Eye in Morristown, NJ. The puppy is delivered at about 6 weeks and stays with the host family until the puppy reaches 12-15 months of age, at which time it is returned to The Seeing Eye for the appropriate training to become a Guide Dog. The host family is responsible for introducing the dog to the public - independently along with group excursions. Fees paid to a veterinarian are reimbursed by the Seeing Eye. However, dog food, toys and travel are not reimbursed in full. Someone in the club was wondering if these unreimbursed expenditures could be claimed as a charitable deduction. My gut feeling was that since these expenditures are made through a grocery or pet store it would be difficult to substantiate these expenditures for inclusion on the Form 1040 Schedule A. The travel, however, to attend meetings and outings may be something that could be utilized on the Form 1040 Schedule A.”
According to IRS Pub 526 (Charitable Contributions) –
“Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. The amounts must be:
• Directly connected with the services,
• Expenses you had only because of the services you gave, and
• Not personal, living, or family expenses.”
I found this advice being given at the “Frequently Asked Questions About Puppy Raising” Page of the Guide Dogs for the Blind website –
“Q: Are the costs of raising a Guide Dog puppy tax deductible?
A: Yes. Guide Dogs for the Blind is a nonprofit charitable organization, and all expenses incurred by the raiser as they relate to raising the puppy (dog food, veterinary bills, gas mileage, etc.) are considered a donation to Guide Dogs. Guide Dogs suggests all puppy raisers consult with a tax advisor to receive the proper IRS requirements for documentation.”
The Seeing Eye in Morristown, NJ is a qualified charity. The purpose of the organization is to raise and train Seeing Eye dogs for use by a blind person. The dog is placed in the volunteer taxpayer’s home by The Seeing Eye as a puppy to be raised. The volunteer taxpayer begins the dog’s training by “introducing the dog to the public - independently along with group excursions”. When the dog is old enough to begin actual guide dog training it is returned to the organization.
The email indicates that the expenses incurred by the family, other than veterinarian bills, are “not reimbursed in full”. According to the organization’s website, it “provides a stipend to help defray the cost of food”, but this does not cover the total cost of the food. And no reimbursement is given for travel costs.
There is an actual “out of pocket” for food as well as for dog toys and travel to the vet and “to attend meetings and outings”.
Let’s apply the guidelines in the IRS pub.
1. A portion of the expenses are unreimbursed. There is a true “out of pocket”. Only the "out of pocket" portion is deductible.
2. The expenses are directly connected with the service of raising the puppy provided by the volunteer taxpayer.
3. The expenses are incurred only because of the service of raising the puppy provided by the volunteer taxpayer. And
4. These are not “personal, living, or family expenses”. The volunteer taxpayer is not taking in the dog to be the family pet – but as a true volunteer service to the organization. The taxpayer is required to begin the puppy’s socialization training and to return the dog when it is old enough for more specialized training.
As for substantiation – a travel diary (notes made in a regular pocket date book) would document the miles driven to meetings and organization sponsored outings. The deduction in this case would be 14 cents per mile (the standard mileage allowance for charity). The fact that the cost of the dog food and toys are on bills from pet stores and groceries should not matter. One would just circle the applicable items and make a note on the individual receipts and save them in a separate envelope. At the end of the year the amounts would be added up and the stipend received would be deducted to determine the amount of the tax deduction.
If the puppy placed by The Seeing Eye is the only dog in the household substantiating the cost of food, etc. is easy. If there is one or more other family dogs in the picture one would have to allocate the food purchases among the dogs, unless a special brand or type of food is purchased for the future guide dog that is different from the food purchased for the family dog(s). In the case of multiple dogs the cost of “toys” may be questionable, unless the volunteer taxpayer is told by The Seeing Eye what specific toys or other aides are to be purchased to assist in the puppy’s specialized socialization training.
Of course, as the email suggest, these volunteer expenses are only deductible if you can itemize on Schedule A.
FYI, according to the IRS publication on Medical and Dental Expenses (Pub 502) –
“You can include in medical expenses the costs of buying, training, and maintaining a guide dog or other service animal to assist a visually-impaired or hearing-impaired person, or a person with other physical disabilities.”
So when the guide dog is placed with a blind person, that person can deduct in full, as a medical expense (subject to the 7 1/2% of AGI exclusion) all the costs associated with the dog (i.e food, vet bills, etc).
The guidelines used to determine if the dog-raising expenses of my friend and his wife are deductible can be applied to other types of volunteer work.
For example, if you are a regular “docent” at a museum, or if you are a Board or committee member of a charity, or if you drive members of your church’s youth organization to group events you can deduct your round trip mileage to the museum, to attend meetings, and to the events. And if you are a scoutmaster you can deduct the cost to purchase and clean your uniform. IRS Pub 526 discusses such deductible expenses in more detail.
So, Jack, I hope that I have answered your question.
Do any of my fellow tax professionals have anything to add?