Have you always wanted to save the rain forest? Teach a child in a third world country to read? Offer your medical expertise to displaced refugees? Lots of us have aspirations of making the world a better place — but few of us act on them.
This summer, why not consider taking your family on a charitable vacation? You can make a difference by volunteering your services for organizations that need your skills, teach your kids about giving back to those in need, and see the world — all with some nice tax perks.
When it comes to tax deductions for charity, you can claim a deduction on Schedule A on your federal income tax return. This means that in order to claim the deduction, you must itemize your deductions — if you claim the standard deduction, you may not take a charitable deduction.
Your deduction is limited to donations of cash (or cash-equivalent), property and expenses. The value of your time spent volunteering for charitable organizations is never deductible. This is true even if you keep great records and even if you can easily put a dollar figure on the value of your time. The cost of your services cannot be included in the total of your charitable deduction.
That said, you can claim out-of-pocket expenses as a charitable deduction if those are related to volunteering for charitable organizations. To qualify, those expenses must be:
- Directly connected with the services
- Expenses you had only because of the services you gave
- Not personal, living or family expenses.
Deducting travel expenses
Included in the list of expenses that you can deduct — so long as you meet the criteria listed above — is the cost of travel while you are away from home performing services for a charitable organization. Travel expenses include air, rail and bus transportation (as well as expenses for your car), taxi fares or other costs of transportation between the airport or station and your hotel, the cost of lodging and the cost of meals. And more good news — since these travel expenses are not business-related, they are not subject to the same limits as business-related expenses.
Clearly, the expenses must be related to the donation of your charitable services and not for personal use — you can’t write off the cost of travel to Costa Rica to lay on the beach and stare at sea turtles. While it’s okay to have a good time — and in fact, I’d encourage you to do so (or why go in the first place?) — the IRS wants the focus of the trip to be charitable. You can only claim expenses for travel “if there is no significant element of personal pleasure, recreation or vacation in the travel.”
In other words, think about why you are on the trip in the first place — are you helping or merely hanging out? The IRS doesn’t have a ban on fun. However, it does take the position that even if you enjoy the trip, you can take a charitable deduction for your travel expenses only if you are on duty in a “genuine and substantial sense throughout the trip.” If you have only nominal duties for the charity, or if for significant parts of the trip you do not have any duties for the charity, you cannot deduct your travel expenses.
Any supplies or prizes that you buy for the charity and/or your trip are also deductible so long as they meet the criteria outlined above. This might include, for example, diapers or clean sheets for a hospital or crayons and stickers for a daycare. This wouldn’t include supplies personal to you, even if you believe you really need them (yes, that includes sunscreen or a big, floppy hat — even if you freckle like mad at the first ray of sunshine).
No matter how you choose to support the charity, keep excellent records. When you travel or otherwise spend money out-of-pocket, keep your original receipts and get documentation from the charity to substantiate your donation where possible. I also highly recommend keeping a travel journal noting your services and the time you spent volunteering.
A quick word of warning — if it sounds too good to be true, it probably is. Be sure to check out any organization — including verification of its tax exempt status — thoroughly before signing up. If you have specific questions about what might be deductible, check with your tax professional.