Volunteering & Tax Deductions

Most of us find ourselves volunteering at some point in our lives and the reasons are numerous.  Volunteering looks great on a college or work resume. If you have interests, causes, or hobbies that you believe strongly in, volunteering in those fields is a great way to give back to the community.  Volunteering just feels good! But can you receive tax benefits in the form of credits or deductions for the time you spend volunteering? Is volunteer time tax deductible? The short answer is no. Providing free professional services to a qualifying nonprofit cannot be claimed as a tax deduction.  The IRS lists volunteer time as a contribution you cannot deduct for in their Publication 526: Charitable Contributions document.  

So what is the good news?  While you can’t claim your time, you can deduct for out of pocket expenses incurred as a part of volunteer such as uniforms and transportation.  Transportation can include travel expenses such as lodging and meals, provided the trip is primarily for volunteering and not leisure. If you use your own vehicle for volunteer work, gas and oil costs are reimbursable.  Gas can be reimbursed at the rate of $0.14 per mile and tolls and parking costs are deductible as well. Entertaining potential contributors to your charity through events such as fundraiser are also deductible expenses.

To claim any deductions, please remember – you WILL need documentation of the unreimbursed expenses for expenses totaling more than $250.  Documentation required includes a list of expenses with receipts and a letter from the charity explaining the work done. Acceptable expenses are also listed in Publication 526.  You cannot have received reimbursement from the charity for these expenses in order to claim. Additionally, the expenses accrued must be solely the result of volunteering and not due to any personal interest or benefit.

To receive tax deductions, the organization that you are volunteering for must be a qualified nonprofit, tax-exempt organization.  Not sure? There are several ways to verify status. You can ask the charity for a copy of their 501(c)(3) letters. The IRS Publication 78 contains a list of qualified organizations at irs.gov or by calling 877-829-5500.

Take the time to claim the deductions due to you through volunteer work.  As you assist charities by supplying your time and skills, the IRS assists taxpayers by making it more feasible to volunteer through tax deductions.  Some volunteers look at the money saved through taxes as more that they can contribute to the causes that they believe in!

Disaster Relief Scams

Continuing our unfortunate series on scams to be aware of….disaster relief scams.  More common during this time of year when hurricanes and other natural disasters are more prevalent, educating yourself is the best step to prevention.  The IRS warns taxpayers to look out for disaster scams which could originate through email, phone call, social media, or even in person.

As a part of educating yourself to prevent fraud, it is essential to know the correct contact numbers, websites, and organizations.  If you need disaster assistance the number for help is 866-562-5227.  For anyone who would like to make a donation to help, an accurate list of organizations eligible to receive tax-deductible charitable contributions is on the IRS website.  For more information from the IRS on disaster scams, you can visit their link here.  Information is also available on how to report suspicious activity.  The FEMA website contains additional information on correct disaster phone numbers and what to do if you suspect fraud.

Another step to prevention is to always pay with a check or credit card so that you have a record of your transaction.  We discussed other scams that target taxpayers at this time of year in Tax Scams.  The advice for disaster relief scams is very similar in both cases….NEVER give out personal information to any organization you can’t verify.  This includes account numbers, social security numbers, pins or passwords.

It is certainly upsetting that people will use disaster as a means to scam taxpayers.  Stay cautious with your personal information at all times and do your research before making donations.  There are definitely plenty of worthwhile organizations available to donate to and help make a difference!

Tax Scams

As summer begins, the IRS warns about tax scams that have a high potential to occur at this time of year.  With taxes just filed, many people are expecting to hear from the IRS, but beware!

Never give out your social security number, account numbers, or passwords/PINs.  If you are asked for personal information, hang up! Get in touch with the agency that is contacting you using a number that you have on file for them and know to be accurate.  The IRS can be reached at 1.800.829.1040.  

The IRS does not leave pre-recorded messages or send emails, so if you receive one, you can be pretty sure it’s a scam.  The IRS will also not call and require payment over the phone. These calls are made under threat of serious action being taken without immediate payment, not a tactic employed by the IRS.  Suspicious emails should be reported to phishing@irs.gov.  

The IRS website has a list of signs to look out for to prevent scams. They also include steps to take in the event anything suspicious is sent to you.   Looking for more information? Forbes shares a list of the 12 most popular tax scams.  Please educate yourself and be aware to save yourself a lot of headache in the future!

Credit Card Debt

Paying off credit card debt can be like losing those few extra pounds you want to eliminate – it’s hard to get started and equally challenging to find a plan that you can stick with in the long run.  There are several different tactics for paying off debt, but two of the most popular are the Snowball and the Avalanche approach. With the snowball approach, you pay the minimum amount due for each credit card each month and put any extra towards the credit card with the smallest debt.  When that credit card is paid off, you then put extra amounts to the card with the next smallest debt. Using the avalanche method switches gears from the card with the smallest debt to focusing on the card with the highest interest amount first. The avalanche method is often preferred because it can save you more money in terms of lower interest payments over time.

As you pay off credit card debts, it is also the right time to look at how to prevent it from occurring again.  What changes can you make to your lifestyle to prevent future over spending? The first step is to create a budget.  If you find expenses are greater than money earned each month, use your budget to take a look at where you can reduce your expenses.  Is it possible for your family to downsize an expensive car or one that is a gas hog? Is your debt situation caused by owning a house that just doesn’t fit the budget?  Often times monetary changes can be more subtle in the forms of eating in more than going out or cutting some expensive tv or movie viewing subscriptions. If your electric bill is high, take a look at what is eating up your electric.  Is it possible to heat or cool your home in another way? Are you unplugging all electronics each day?

Once you’ve selected the pay off method that is best for you, created a budget, and looked at which costs to eliminate in the future, it’s time to set a goal for how long you want to take to pay off your credit card debt.  Curious how long it will take based on interest, minimum payments, and all those other factors? Fortunately, there are a multitude of credit card payoff calculators available that can then show you what your monthly payment needs to be.  At The Balance, they review and recommend 5 of the best.  Which payoff calculator is best for you will likely be determined by the factors at play in your own debt, such as how many cards do you have.

We’ve discussed previously what to do with your tax refund.  Paying off some or all of your credit card debt was at the top of that list.  Putting money towards debt helps to lower the amount of interest that you are paying, thereby saving you money in the long run.  If you are worried about your credit score, having a lower amount of debt helps to increase that rating as well. If you are so fortunate to receive a financial bonus at other points in the year, putting a portion of that towards debt is usually the best choice.  If you find you need someone else to turn to with questions about credit card debt, the National Foundation for Credit Counseling is a non-profit that can help!