Travel for Charitable Reasons Can Yield Tax Benefits by Adam Cohen, CPA
Posted on October 05, 2017 by Adam Cohen
Benevolent individuals who volunteer their time for nonprofit organizations may be able to reduce their taxable income when their charitable work takes them away from home. U.S. tax laws allow individuals to deduct some of the expenses they incur when traveling on behalf of charitable organizations. Here’s what taxpayers need to know.
Duty. The time and work taxpayers commit to a non-profit must be “real and substantial” throughout the length of a charitable trip. Taxpayers cannot deduct expenses if they only have nominal duties, or if they do not have any duties, for significant parts of the trip.
Qualifying Charities. For taxpayers to deduct costs related to charitable travel, they must volunteer for a religious group, government or other organization that has received tax-exempt status from the IRS under Internal Revenue Code 501(c)(3). To make this determination, individuals may search an organization’s federal tax status and filings online at the IRS’s Exempt Organizations Select Check tool or at www.charitynavigator.com.
Qualifying Expenses. Deductible expenses include the necessary and unreimbursed out-of-pocket costs a taxpayer incurs only for and as a direct result of his or her volunteer service. This may include expenses for air, rail, bus, taxi or automobile transportation, lodging and meals. Excluded from this list are personal living expenses and any costs related to a taxpayer’s non-charitable recreation or vacation time. In addition, taxpayers may not deduct the value of the time or services they provide to a charity or the income they lost while serving as an unpaid volunteer.
Individuals who volunteer out-of-state or overseas should seek the counsel of professional tax advisors to identify opportunities in which their activities may qualify for potential tax savings.
About the Author: Adam Cohen, CPA, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via e-mail firstname.lastname@example.org.