Q: Several of our volunteers are very committed to our children’s ministry. At times, instead of asking for a reimbursement for their ministry expenses, they will ask if they can turn their receipts in and count them as a charitable contribution. With the accounting software I use at my church, I can give them a credit under non-cash donations. Is this okay to do?
Volunteers are essential to the success of many church ministries. Occasionally, volunteers prefer to treat their out-of-pocket expenses as charitable contributions rather than seek reimbursement. How can they properly document these expenses, and what are the IRS guidelines?
Are Unreimbursed Out-of-Pocket Expenses Tax-Deductible?
Yes, unreimbursed out-of-pocket expenses related to volunteer services for a church or charitable organization are tax-deductible. Examples of deductible expenses include:
- Supplies for Sunday school classes
- Use of a personal vehicle for church activities (14 cents per mile)
- Small equipment purchases
- Food for youth group events
- Travel expenses for mission trips or church-sponsored events without a significant element of pleasure
These expenses are deductible only if detailed records are maintained and a receipt is obtained for expenses over $250. For detailed IRS guidance, refer to IRS Publication 526.
What Should a Church’s Receipt Include?
When a church provides a receipt for a volunteer’s out-of-pocket expenses, the receipt should include the following details:
- Date of the receipt
- Name and address of the donor
- A description of the volunteer services performed
- The year the services were performed
- A statement confirming that no goods or services were provided in exchange for the donation, other than intangible religious benefits
- A thank-you note acknowledging the volunteer’s service
It is not advisable to include the dollar amount of the expenses on the receipt, as this creates an additional burden on the church to verify the legitimacy of all expenses.
Can Volunteers Deduct Services or Foregone Income?
While many volunteer expenses are deductible, there are limits. For example:
- The value of volunteer services is not deductible. For instance, if you are a painter and volunteer to paint the church office, you can deduct the cost of paint and brushes but not the value of your labor.
- The foregone income or rental value of facilities provided to a church is not deductible. For example, allowing the church to use extra space in your warehouse for free does not qualify for a deduction.
Are There IRS Regulations on Volunteer Expenses?
The IRS has not issued a specific regulation listing all deductible volunteer expenses. However, IRS Publication 526 provides guidance on this topic, including examples of allowable deductions. Common examples include:
- Supplies used in teaching Sunday school
- Uniforms required for volunteer services and their maintenance
- Mileage for church-related activities (at the charitable rate of 14 cents per mile)
- Travel expenses for church-sponsored mission trips
Conclusion
Church leaders should ensure that volunteers understand the proper documentation required to claim unreimbursed out-of-pocket expenses as charitable contributions. For more details, refer to IRS Publication 526 or consult with a tax professional.
FAQs
1. Can a volunteer deduct the value of their time?
No, the IRS does not allow deductions for the value of volunteer time or services.
2. What is the mileage rate for charitable purposes?
The mileage rate for charitable purposes is 14 cents per mile. This rate is set by the IRS and may change over time.
3. Can a church include the dollar amount of out-of-pocket expenses on a receipt?
No, the church should not include the dollar amount of expenses on the receipt. The responsibility for documentation lies with the volunteer.
4. Are travel expenses for mission trips deductible?
Yes, travel expenses for mission trips are deductible if the trip does not include a significant element of personal pleasure or vacation.
This information is current as of December 2009 and is not to be construed as legal advice.
