Deducting Volunteering Expenses: My parents are avid motorcycle riders. It is literally all they do. As soon as the snow melts, those bikes are out, and they will ride as late into the fall as the weather allows, regardless of the temperature, until ice and snow prohibit otherwise. On the weekends they will take on the entire state of Minnesota, and for their vacations, they will travel the country, hours upon hours, all on their bikes. When they aren’t riding, they are looking at maps, planning their next excursion.
So, yeah, they like to ride.
They also have big hearts and charitable causes are important to them. So, when they have a chance to combine their passion for riding with their desire to make a difference, they are the first in line to lend a hand. Every summer, they volunteer as motorcycle escorts for a 500-mile bicycle (the kind with pedals and requires an impressive level of physical endurance) ride serving as a fundraising effort to help those suffering with multiple sclerosis. The efforts of the escorts are crucial to the safety of the bicyclists and smooth operation of the event.
Volunteering as a motorcycle escort at these events not only is a significant time commitment, but also requires out-of-pocket expenditures toward supplies, fuel, lodging, and meals while away from home.
Each year, at tax time, my dad gathers the detail of the expenses incurred and includes them with his tax information used in tax return preparation. The question is: can those out-of-pocket expenses be deducted?
Yes – such payments are treated as direct payments to the charity, provided, of course, certain requirements are met.
1. The organization must be a qualified charity.
Generally referred to as “501(c)(3) organizations”, the charity must be both tax-exempt and able to receive charitable contributions. How do you know a charity is a “qualified charity”? Head over to irs.gov and utilize the “Tax Exempt Organization Search”. Take note that while religious places of worship may not be listed in the database, most of these organizations are qualified charities.
2. Expenses must be incurred while performing services for the charity.
In IRS speak, the out-of-pocket expenses must be “incident to the rendition of services” to the charity. They are incurred in the course of necessary volunteer work on the behalf of the organization.
3. There must be no significant element of personal pleasure.
Expenses incurred must be directly attributed to volunteer services provided to the charity and have direct benefit to the charity. The services provided to the charity must be substantial and the ratio of service time compared to free time is a crucial determination of the deductibility of the expenses.
4. Cash contribution substantiation rules apply.
Contributions are required to be substantiated, be it by cancelled check, receipt, or other written record. Contributions greater than $250 must have written acknowledgement from the charity. Volunteers will need to request a statement from the charity detailing the services provided and indicate whether the volunteers received any consideration from the charity. This statement does not need to include the amount of out-of-pocket expenses incurred.
Provided these requirements are met, unreimbursed expenses qualifying for charitable deduction may include items such as supplies, uniforms specific to the charity, phone charges, copying fees, postage, and travel. Travel expenses include air, rail, and bus transportation. Auto expenses can be deducted using the charitable standard mileage rate of .14 cents per mile. Travel meals are deductible (subject to the 50% limitation), as well as lodging while required to be away from home. Contact Jackie Kennedy, CPA at jkennedy@myboyum.com for additional information on individual tax questions.