Monday, June 6, 2011


The Tax Court case that Kay Bell talked about in “Cat Lady's Feline Foster Care Tax Deduction Slashed From $12,000 to $250”, which I referenced in Saturday’s BUZZ, brings to our attention the availability of a deduction for a taxpayer's out-of-pocket expenses while doing volunteer work for a qualified church or charity.

As Kay mentions in her post, each day Jan Elizabeth Van Dusen “fed, cleaned, and looked after the cats. She laundered the cats' bedding and sanitized the floors, household surfaces, and cages. Van Dusen even purchased a house ‘with the idea of fostering in mind’. Her house was so extensively used for cat care that she never had guests over for dinner.”

Van Dusen claimed $12,068 in out of pocket volunteer expenses, of which the Tax Court allowed only $250 – basically, as I understand it, because she did not get a letter from the charity, Fix Our Ferals, outlining and acknowledging her work prior to filing her return.

The “Yellow Rose of Taxes” quotes
IRS Publication 526 on the subject –

You can claim a deduction for a contribution of $250 or more only if you have an acknowledgment of your contribution from the qualified organization or certain payroll deduction records.

If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions

Let us take a look at the deduction and the requirements for successfully claiming it on Schedule A.

The IRS tells us that –

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:

· Unreimbursed,
· Directly connected with the services,
· Expenses you had only because of the services you gave, and
· Not personal, living, or family expenses

And it specifically adds -

You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization.”

I have always used the example of a Scout Master for uniforms, but, as you will see below, the IRS uses the uniform worn by a volunteer Red Cross nurse’s aid. You will not that in addition to the actual cost of purchasing the uniform you can also deduct “upkeep” – such as the cost of cleaning or mending the uniform.

The IRS provides some Q + A regarding deducting volunteer expenses.

Q - I do volunteer work 6 hours a week in the office of a qualified organization. The receptionist is paid $10 an hour to do the same work I do. Can I deduct $60 a week for my time?

A - No, you cannot deduct the value of your time or services.

Q - The office is 30 miles from my home. Can I deduct any of my car expenses for these trips?

A - Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you are a volunteer. If you don't want to figure your actual costs, you can deduct 14 cents for each mile.

Q - I volunteer as a Red Cross nurse's aide at a hospital. Can I deduct the cost of uniforms that I must wear?

A - Yes, you can deduct the cost of buying and cleaning your uniforms if the hospital is a qualified organization, the uniforms are not suitable for everyday use, and you must wear them when volunteering.

Q - I pay a babysitter to watch my children while I do volunteer work for a qualified organization. Can I deduct these costs?

A - No, you cannot deduct payments for child care expenses as a charitable contribution, even if they are necessary so you can do volunteer work for a qualified organization

One of my biggest clients for about 20 years was a non-profit Art Center that maintained an art school and a gallery. The organization had many volunteers – receptionists, docents, Board and Committee Members – and held several fund-raising events during the year that were run by volunteers. Round-trip travel from the volunteers’ homes to the Center was deductible at the 14 cents per mile allowance.

While all other standard mileage allowances are adjusted annually by the IRS based on actual costs of operating a vehicle, the 14 cents per mile for charitable travel is set by Congress, and, with a brief temporary exception for travel related to Hurricane Katrina, has not been increased for many, many years. It is about time for an increase.

As with any other form of contribution record-keeping is important. The IRS tells us –

If you render services to a qualified organization and have unreimbursed out-of-pocket expenses related to those services, the following three rules apply.

(1) You must have adequate records to prove the amount of the expenses.

(2) You must get an acknowledgment from the qualified organization that contains:

a. A description of the services you provided,
b. A statement of whether or not the organization provided you any goods or services to reimburse you for the expenses you incurred,
c. A description and a good faith estimate of the value of any goods or services (other than intangible religious benefits) provided to reimburse you, and
d. A statement that the only benefit you received was an intangible religious benefit, if that was the case. The acknowledgment does not need to describe or estimate the value of an intangible religious benefit.

(3) You must get the acknowledgment on or before the earlier of:

a. The date you file your return for the year you make the contribution, or
b. The due date, including extensions, for filing the return

As with business use of your car, you should keep a log of your charitable mileage. And, as I recommend for business mileage, you can use a pocket date book as your “travel diary”. You can write the name of the church or charity (Summit Art Center), the location (Summit), the volunteer activity (volunteer receptionist or Board Meeting), the number of miles (23 miles) and any parking and tolls (35 cents – GS Pkwy) on the page or section for the particular date. Actually you can keep track of all deductible mileage – business, medical and charitable – in the same pocket date book, perhaps using a different colored pen for each activity.

You should also get a letter from the church or charity at year end that describes the types of volunteer work you do for the organization during the year and includes the other required information listed above. You do not have to attach this letter to your return; you just need to keep it on file. If your volunteer deduction is substantial you may want to attach a copy to your return as well as a statement of how your deduction was calculated.

You will note from the IRS rules that you do not need to get a letter or acknowledgement at the point of contribution - you have until you actually file the return to get the letter. What you should do in December is ask each organization for whom you volunteered for a letter.

Ms Van Dusen’s situation was unique – in my almost 40 years in the business I have never come across a deduction for volunteer expenses as huge as the one she claimed, or for that fact any deduction that would equal or exceed $250 for each individual incident – so one letter per year from each organization should be sufficient. In order to “donate” $250 at one time you would have to drive 1,786 miles in a single trip.

As usual if you have any questions about deducting your out of pocket volunteer expenses you should ask your tax professional.


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