Tax Benefits Of Giving Time And/Or Money To A Charity

Barry Fowler

With the first chill of fall most people’s thoughts turn to the activities of autumn: Football, Thanksgiving, pumpkins, apples, (did I mention football?) and, of course, the holidays.

For those looking to limit how much they give to Uncle Sam at tax time, this is also the time to turn your thoughts to giving to a favorite charity.

According to Blackbaud, Inc., a leading supplier of services for nonprofit organizations, “About 34% of all charitable giving is done in the last three months of the year.” Savvy donors at every level understand the practical benefit of giving before the end of the calendar year. This ensures credit is received on their next tax return. Even if all you have to give is your time, you probably qualify for some tax breaks too.

Volunteer Services

Maybe all you have to give to a favorite charity is your time and talents. If that is the case, you still may qualify for some tax breaks. Here’s how it works.

Although you may not claim a deduction for the value of the services you perform for a charity, you may claim deductions for out-of-pocket costs incurred while performing the services. Typical deduction limits and substantiation rules apply.

For instance:

Away-from-home travel expenses incurred while performing services for a charity (such as out-of-pocket round-trip travel cost, taxi fares, lodging, and meals) are only deductible if the primary purpose of the trip was to perform services for the charity and those services do not involve lobbying activities.

– Expenses incurred in entertaining others on behalf of a charity (such as wining and dining a potential contributor). Keep in mind that the cost of your own entertainment or meal is not deductible.

– If you use your car while performing services for a charitable organization, you may deduct your actual unreimbursed expenses directly attributable to the services (like gas and oil, parking fees, and tolls).

– If you wear a uniform you while performing volunteer work for a charity, you may deduct the expenses for the purchase and cleaning of that uniform.

ProTip: Be sure to keep a record and track of your mileage and expenses.

Financial Contributions

If you contribute financially to a favorite organization or are planning to support a different charitable organization this holiday season, do your research. More than 1 million charities are registered with the Internal Revenue Service (IRS). Compare organizations and study how they function by visiting sites such as the Better Business Bureau. The best charitable organizations ensure that the majority of their revenue goes to the causes they support, not operating expenses.

Only give to registered charities. In order to accept donations, most charitable organizations — depending on the state – must be registered with the Department of Justice (DOJ). Before you donate, check your state’s DOJ database to confirm the organization is registered.

Make sure your gift is tax-deductible. The government recognizes the value of charitable organizations so many contributions to approved charities are tax-deductible. The key to receiving a tax deduction is making sure the charitable organization you choose is qualified by the IRS. To be sure, visit the IRS website. You must also keep accurate records, so get a written acknowledgment or receipt for your financial contribution.

Enjoy the fall football season, the excitement of all the holidays and make sure you get the credit you deserve at tax time if this is also a season of giving.

Barry Fowler is licensed to represent taxpayers before the Internal Revenue Service (IRS) and is a longstanding member of several tax industry professional organizations including the National Association of Enrolled Agents (NAEA), National Association of Tax Preparers (NATP), Texas Society of Enrolled Agents (TSEA), and the American Society of Tax Problem Solvers (ASTPS). With experience in the tax and finance industry spanning over twenty years, Fowler’s expertise includes tax resolution, personal financial planning, tax return preparation, financial statements, and general ledger bookkeeping. He has been instrumental in helping hundreds of people resolve complex tax issues with the IRS.

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