Q: What advice can we give to our volunteers who want to deduct their time or travel expense when volunteering at church?
A: In 2014, volunteers donated almost 8 billion hours serving in civic, religious or school organizations. Many times, these volunteers provided their own transportation and incurred other unreimbursed expenses to perform this service.
While some churches reimburse employees for business-related expenses, volunteers do not often receive reimbursement for out-of-pocket expenses, and most do not expect or want to get reimbursed. However, the IRS does allow taxpayers to deduct some charity-related expenses, which can lower their taxes.
Consider the following example:
John is a professional electrician. He drove his car to the location of a new building that his church was constructing and helped wire the building for electricity. He used his own tools, and donated some of the wiring and fixtures. What expenses can John deduct on his taxes?
In this example, the volunteer provided the time and service of his skilled labor, and incurred expenses related to driving his car to the work site, and donating some wiring and fixtures. Here are some tips from the IRS to help John and his tax preparer figure out what expenses can be deducted:
Qualified Charities. To deduct your costs, you must volunteer for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are generally qualified, and do not need to apply to the IRS. Ask the group about its status before you donate. You can use the Select Check tool on IRS.gov to check a group’s status.
Out-of-Pocket Expenses. You may be able to deduct some of your costs including travel. They must be necessary while you are way from home.
All costs must be:
- Directly connected with the services,
- Expenses you had only because of the services you gave, and
- Not personal, living or family expenses.
With regard to travel costs that are incurred while performing volunteer work for charities, the IRS provides the following details:
Genuine and Substantial Duty. Your charity work has to be real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.
Travel You Can Deduct. The types of expenses that you may be able to deduct include:
- Air, rail and bus transportation,
- Car expenses,
- Lodging costs
- Cost of meals, and
- Taxi or other transportation costs between the airport or station and your hotel.
Travel You Can’t Deduct. Some types of travel do not qualify for a tax deduction. For example, you can’t deduct your costs if a significant part of the trip involves recreation or
Lastly, even though you may have a valuable skillset, the IRS does not allow taxpayers to deduct the value of the time or services they donate to the church or charity. According to the IRS, “You can’t deduct the value of your time or services that you give to the charity. This includes income lost while you serve as an unpaid volunteer for a qualified charity.”
Rollie Dimos, CIA, CISA, CFE, is the Director of Internal Audit and the Center for Leadership and Stewardship Excellence at the AG National Office. As an auditor in the government and nonprofit sectors, Rollie has been helping leaders assess the strength of their organizational controls for over 25 years. If you have a question about this article, you can contact Rollie at firstname.lastname@example.org.
Rollie is the author of two books: Integrity at Stake: Safeguarding Your Church From Financial Fraud and Balanced Budget, Balanced Life. Using real-life fraud cases, Integrity at Stake helps churches assess their internal controls and minimize the risk of fraud. In Balanced Budget, Balanced Life, Rollie helps the reader create a personalized financial plan to achieve the balance between saving enough to live on and spending to enjoy a life worth living.