Your Money: When can giving back get you a break?
February 5, 2013
Most people who itemize already know they can deduct the money they send to their favorite charities, but what about out-of-pocket costs? This area is a lot less clear, but hopefully the following will help you can gain tax advantages from all the good works you do. The first question I usually get on this topic is how to deduct your time. The answer is simple: you cannot. Time and effort is never deductible, only out-of-pocket costs.What costs are eligible? Transportation is the biggest. If you use your car for charity, you can deduct 14 cents per mile, plus any parking and tolls. This includes using your car to attend meetings or conferences, pick up or deliver items, or perform services. If you need to buy airplane or train tickets, those expenses would be deductible as well.Entertainment expenses are also eligible for deductions. If you host a fundraiser or board meeting in your home, you can deduct the full cost of the food and beverages provided. I highly recommend that if you shop for an event like this, you pay for the groceries separate from your usual shipping trip in order to make it easy to track and deduct at year end. If you pay to attend a fundraising event, you must deduct the fair market value of the meal from the cost of your ticket. So, if you pay $200 to attend an event, and the charity tells you the meal was worth $45, then you can only deduct $155. There are also some smaller deductions that are rare, but still count. If you have to pay for a uniform to perform your duties, such as a Girl Scout or Boy Scout uniform or safety equipment, you can deduct those costs. If you happen to host a foreign- exchange student, you can deduct $50 per month for each month they both live in your house and attend high school. Honestly, this one came as a surprise to me, so if you know anyone who hosts an exchange student, please be sure to share!There are also some specific expenses that are not deductible. Especially for the tax year 2012, it’s important that people realize that political contributions are not deductible. This includes cash donated to campaigns and, unlike what I’ve written above for charitable dinners, fundraising dinners for political parties and politicians are not tax deductible. Another common oversight is the National Fraternal Order of Police. This organization often fundraises through telephone calls and mailings, and while it does support a great cause of our law-enforcement officers, the IRS considers it a political lobbying organization, not a charitable organization. And, perhaps most common, but most heart-breaking is that you cannot deduct the cost of Girl Scout cookies or Boy Scout popcorn if you purchase the products for consumption. However, if you gift the boxes to a community organization or send them overseas to the troops, then you can take a deduction for the purchase.Unfortunately, this is one of many areas of tax deductions that don’t have clear-cut answers, but thanks to the power of Google, you can generally get the answers you need if you just type in the deduction you are trying to take or the charity you are supporting. Most charities have great websites which help make sense of what you are contributing and what the tax consequences are.Michele Knight, owner of Knight Accounting & Technology, is a CPA and QuickBooks ProAdvisor based in Dillon. For more info and to contact her, visit http://www.cpamichele.com.