Step Forward to Receive Charitable Deductions for Good Deeds

You can’t deduct the cost of the time and effort you spend on behalf of charity. But that doesn’t mean your good deeds will go for tax naught.

Track your out-of-pocket costs. Even though you can’t deduct the value of your endeavors, itemizers can write off actual expenses associated with charitable activities.

Furthermore, you don’t have to be a board member or one of the charity’s biggest donors. This tax break is available to regular volunteers and others who help out sporadically. What sort of expenses are we talking about? Here’s a partial list.

  • Transportation: If you use your car for charity, deduct the related costs attributable to gas and oil, repairs, insurance, etc. Alternatives: You might opt for the flat-rate deduction of 14 cents per mile (plus related parking fees and tolls). Similarly, you can deduct plane, train or bus costs for traveling to charitable events.
  • Telephone charges: You may deduct the full cost of long-distance telephone calls, faxes and cell phone charges made on behalf of a charity. If you install a landline in your home that you use solely for charitable purposes, the entire cost is deductible.
  • Home entertainment: If you host a fundraiser or aboard meeting, you can deduct the entire cost of the catering expenses as a charitable deduction. Note: The 50% limit on entertainment and meal expenses doesn’t apply here.
  • Fundraising dinners: Normally, you can deduct the portion of the cost that exceeds the fair market value of a fundraising dinner. For example, let’s say you and your spouse attend a dinner that costs $100 a head. If the meal is valued at $35 a head, you can deduct $130 ($200 cost – $70 value.) Note: For amounts exceeding $75, obtain written documentation from the charitable organization.
  • Uniforms: A deduction is allowed for the cost of uniforms used while performing charitable services as long as the clothing isn’t suitable for everyday wear. Classic example: You can write off the cost of Boy Scout or Girl Scout uniforms.
  • Foreign exchange students: If you host a foregin exchange student in your home, you can deduct up to $50 per month for each month the child attends high school. To qualify, the student must live in your home under a written agreement with a qualified charity. Also, the exchange student can’t be a relative.
  • Charitable conventions: You may be able to deduct the cost of attending a convention on behalf of a charity – such as meals and lodging – if you’re an official delegate to the convention. But the convention must be the primary purpose of the trip. The deductible amount includes meals and lodging while you attend the convention.

Individually, these deductions may be small, but collectively they add up. Keep the records you’ll need at tax return time.

Small Business Tax Strategies

July 2021