- Away-from-home travel
- Lodging and meals
- Entertaining for charity
- Automobile travel
- Substantiation requirements
If you volunteered your time for a charity or governmental entity during the COVID-19 pandemic, you probably qualify for some tax breaks. These rules apply to all charity volunteers, not just COVID-19 volunteers. Although no tax deduction is allowed for the value of services performed for a qualified charity or federal, state, or local governmental agency, some deductions are permitted for out-of-pocket costs incurred while performing the services. In this article, we address some examples:
- Away-from-home travel expenses while performing services for a charity, including out-of-pocket round-trip travel costs, taxi fares, and other costs for transportation between the airport or station and hotel, plus 100% of lodging and meals. These expenses are only deductible if there is no significant element of personal pleasure associated with the travel or if your services for a charity do not involve lobbying activities.
- The cost of entertaining others on behalf of a charity, such as taking a large potential contributor out for dinner. The costs of your own entertainment and meals are not deductible.
- If you use your car or another vehicle while performing services for a charitable organization, you may deduct your actual unreimbursed expenses that are directly attributable to the services, such as gas and oil costs. Or, you may deduct a flat 14 cents per mile for the charitable use of your car. You may also deduct parking fees and tolls.
- You can deduct the cost of the uniform you wear when doing volunteer work for the charity, as long as the outfit has no general utility. You can also deduct the cost of cleaning the uniform.
There are some misconceptions as to what constitutes a charitable deduction, and the following are frequently encountered issues:
- No deduction is allowed for the depreciation of a capital asset as a charitable deduction. This includes vehicles and computers.Example: Kathy volunteers as a member of the sheriff’s mounted search and rescue team. As part of volunteering, Kathy is required to provide a horse. Kathy is not allowed to deduct the cost of purchasing her horse. She also cannot depreciate the value of her horse. She can, however, deduct uniforms, travel, and other out-of-pocket expenses associated with the volunteer work.
However, a taxpayer may deduct the cost of maintaining a personally owned asset to the extent that its use is related to providing services for a charity. Thus, for example, a taxpayer is allowed to deduct the fuel, maintenance, and repair costs (but not depreciation or the fair rental value) of piloting his or her plane in connection with volunteer activities for the Civil Air Patrol. Similarly, a taxpayer—such as Kathy in our example, who participated in a mounted posse that is a civilian reserve unit of the county sheriff’s office—could deduct the cost of maintaining a horse (shoeing and stabling).
- A taxpayer who buys an asset and uses it while performing volunteer services for a charity can’t deduct its cost if he or she retains ownership of it. That’s true even if the asset is used exclusively for charitable purposes. So, for example, this rule would knock out a deduction for COVID-19 personal protective equipment such as face coverings and gloves that an individual purchased and used while volunteering at a food bank if the volunteer retains these items after performing the volunteer work. But if that individual purchased and donated PPE to the county for use by medical personnel at a coronavirus testing site, the cost of the items would be allowed.
No charitable deduction is allowed for a contribution of $250 or more unless you substantiate the gift with a written acknowledgment from the charitable organization (including a government agency). To verify your donation:
- Obtain written documentation from the charity about the nature of your volunteering activity and the need for related expenses to be paid. For example, if you travel out of town as a volunteer, request a letter from the charity explaining why you’re needed at the out-of-town location.
- You should submit a statement of expenses to the charity if you are paying out of pocket for substantial amounts, preferably with a copy of the receipts. Then, arrange for the charity to acknowledge the value of the contribution in writing.
- Maintain detailed records of your out-of-pocket expenses—receipts plus a written history of the time, place, amount, and charitable purpose of the expense.
There are also other special charitable provisions for the 2020 tax year, including:
- Taxpayers that do not itemize their deductions can deduct up to $300 of cash contributions.
- Cash contributions for those that do itemize their deductions are not limited to 60% of their adjusted gross income in 2020.
- Employees (where their employer participates) can contribute the value of unused paid vacation and leave time to qualified charities and not have to include the leave payments in income.
For additional details related to expenses incurred as a charity volunteer or the special 2020 charitable provisions, please contact us.