Many taxpayers give much more than just cash to their favorite charity. Many also provide their time, travel, meals, and other “out of pocket” expenses in order to assist the charity in doing good work. And while you can’t take a charitable deduction for your time, you are allowed to deduct other expenses incurred in support of a charity, such as vet bills for your local humane society, or wood and nails for a “habitat” charity.
Let’s examine a house of worship. It’s possible for members to deduct evangelism travel expenses, even if the charity (a church in this example) never initiated, controlled, supervised, or assisted with the trips. The church fostered missionary work in general. Before the trip, the church provided the taxpayers with letters of commendation serving as introductions to other interfaith groups during the trip. And after the trip, the charity publicized the member’s efforts to the other congregations. This allowed the taxpayers to deduct mileage at the prescribed IRS rate, air fare, lodging, and meals while on their missionary trip.
Consider the potential deductions for those taxpayers involved as board members to a charity, or simply significantly involved. In a recent decision, the Tax Court noted “control” by the charity is only one of the factors to be considered. You don’t have to necessarily be controlled or directed by the charity to make your deductions stand up. But there should be a strong affiliation with the charity, and the taxpayer must be accountable to the charity.
There are recordkeeping requirements, of course. Noncash contributions greater than $250 must be acknowledged by the charity. The taxpayer will likely have to request this from the charity with a simple form, one which the charity will to be happy to complete in order to secure your deduction and advance the mission of the charity.
Looking for a secret code? You’ve found it! It’s “GOBULLS”. For more information on this and other tax deductions, contact us.
Your readers may also be interested in what are called charitable remainder trusts. These trusts are used to place monies in trust for the benefit of the donor and the tax-exempt organization. Basically, the donor (and his wife if desired) can be paid an income from the trust for their lives or for a term of years. When this time frame ends the charity named as the residual beneficiary gets the balance in the trust. The advantage for the donor is that they reserve income to themselves and get a tax deduction in the year the trust is funded for the actuarial value of the residue going to charity. There are various types of charitable remainder trusts and the provisions can be fine tuned to meet various needs.
Finally there is something called a charitable lead trust, that works in the opposite way; the charity is paid first and for a number of years and then the balance goes to family or other non-charitable remainder beneficiaries.
Thanks, Steven, that’s great information!