Taxes and Philanthropy
By: Lauren Porter
Disclaimer: This blog post isn’t to serve as professional tax advice. Content was developed from personal experience and reviewing online tax resources. Links are available at the end of the page.
So, 2020 was a year that you were able to donate to different charities that were important to you. Maybe it was the American Foundation for Suicide Prevention, a local Boys & Girls Club, or your city’s recovery center. Did you know that depending on the amount donated and the organization, you may qualify for a tax-deductible donation?
First, you need to confirm that the organizations you donated to throughout the year are eligible for tax-deduction status. Not all nonprofits have 501(c)(3) status, which means they aren’t eligible. Typically, public charities, private foundations, and educational institutions will count. There are other organizations with different codes that may be eligible, but it is important to check. Charity Navigator provides a quick reference breakdown of tax codes, and if they’re eligible. The IRS website has a search tool that will show you qualifying organizations. Many times, the website of the organization will also let you know if your donations are tax deductible.
Single filers can deduct up to $300 of charitable giving ($600 for joint filters) without having to itemize. (Note: prior to 2020, it was $250). This means that you don’t have to provide a breakdown of the giving, receipts from the organizations, or complete an itemized deduction form.
A good practice throughout the year is to keep track of your charitable contributions. Either immediately after your donation or at the end of the year, you should receive a receipt from the organization with your donation amount, their general information, and their ID number. If you donated more than $300 to eligible organizations, you need to fill out a special form, called Schedule A: Itemized Deductions of the IRS Form 1040. Schedule A includes seven different categories of deductions with one of the sections being dedicated to charitable giving.
If your charitable giving deduction is less than the standard deduction (the portion of your income not subject to income taxes), you may not see a difference by filing your itemized deduction form. It is still a good idea to keep a total of your giving and your documents organized and give this to your accountant or tax preparer or enter into online platforms like TurboTax. They can help you understand if itemizing your deductions is worth it for the year. Fidelity Charitable has an online calculator that can help you estimate your potential tax savings.
This is less commonly known, but it is possible to write off expenses that are accrued as a result of volunteer work. This does not include your time, but rather things like mileage, cost of required clothing, taxis or flights, and lodging and meals could count. Mileage to deliver items to an organization can also count, such as delivering food to a food pantry or clothing to your local immigrant resource center. You should check the IRS website to confirm the organization is eligible, just like you would with charitable donations.
It is especially important to keep detailed records for these expenses. You should keep written documentation about the organization and the volunteer work you did and how the expenses were accrued, as well as receipts for all of those out-of-pocket expenses. It is also good to get written confirmation from the organization that the costs you’ve recorded were a direct result of your volunteer work and for no other purpose. For example, lodging for seven days if you only volunteered for two days would not count.
The IRS has a slideshow that explains deducting volunteer expenses in more detail here.
Charity Navigator: Tax Benefits of Giving
IRS Charities and They Volunteers
IRS Tax Exempt Organization Search Tool
H&R Block: Is Volunteer Work Tax Deductible?
Nerd Wallet: Rules for Giving to Charity
Nerd Wallet: How to File Out a Schedule A