This past weekend there was a great 60 Minutes segment on Microsoft founder Bill Gates.  He is one of the greatest entrepreneurs of all time, but more recently has become a leader in charitable giving. Perhaps his greatest deed is his effort to eradicate disease, especially for children under five.

Winston Churchill once said, “We make a living by what we get, but we make a life by what we give.”  I am very impressed by how he has chosen to use his substantial resources and especially his skills.

Nearly no one does charity work for the tax advantages – but all should be aware of the benefit.  Hopefully, it can help you to do even more for your favorite charities.

Everyone knows that money you donate can give you a tax deduction, but what about tax breaks for your service? 

Unfortunately, the answer is no tax deduction is allowed for the value of services you perform for a charitable organization.  But you are entitled to deduct out-of-pocket costs you incur while performing the services.

For example:

  • Away-from-home Travel – Away from home travel expenses while performing services for a charity like out-of-pocket round-trip airfare, taxi fares and other costs of transportation between the airport or station and hotel, plus lodging and meals are deductible.   However, be careful not to mix personal vacations with your charity trip because these expenses aren’t deductible if there’s a significant element of personal pleasure associated with the travel.
  • Meals and Entertainment – The cost of entertaining others on behalf of a charity, such as wining and dining a potential large contributor is deductible.  Your own entertainment or meal, however, is not deductible.
  • Car Expenses – If you use your car while performing services for a charitable organization you may deduct your actual unreimbursed expenses directly attributable to the services (i.e. gas).  Alternatively, you may deduct a flat 14¢ per mile for charitable use of your car, plus parking fees and tolls. 

Be very careful to properly substantiate your charitable expenses.  Keep acknowledgment of any contributions you make to the charity.  This acknowledgment generally must include the amount of cash, a description of any property contributed, and whether you got anything in return for your contribution.

Try to never pay for a expense for the charity directly.  Pay the money first to the charity, then have the charity pay for the expense. If this is not possible, safeguard your deduction by:

  • Getting written documentation from the charity about the nature of your volunteering activity and the need for related expenses to be paid. For example, if you travel out of town as a volunteer, get a letter from the charity explaining why you’re needed at the out-of-town location.
  • If you are out-of-pocket for substantial amounts, you should submit a statement of expenses and, preferably, a copy of the receipts to the charity, and arrange for the charity to acknowledge in writing the amount of the contribution.
  • You should maintain detailed records of your out-of-pocket expenses and receipts plus a written record of the time, place, amount, and charitable purpose of the expense.