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25 Days of Giving: What the “No Smile” Rule Means for Your Taxes

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The title of this sounds pretty lacking in the “merry and bright” department…especially considering this is the 25 Days of Giving series! But, the name here describes a little-known deduction beneficial for volunteers…and nonprofits to stress to volunteers to indeed encourage more volunteering!

The IRS does NOT allow a charitable deduction for volunteering your services. However, out-of-pocket expenses relating to volunteering are deductible. Yes, seriously!

Volunteering time NOT tax deductible, but out-of-pocket expenses ARE

Any given charity should provide volunteers with a description of the contributed services and state whether there has been any transfer from the charity of goods or services back to the donor. In addition to other out-of-pocket expenses, mileage is deductible at the IRS rate. Also, expenses like tolls and parking can be deductible.

For example, if a volunteer travels to attend a meeting or conference sponsored by the charity, then there is a deduction only if there is “no significant amount of personal pleasure” in the meeting. This has become known as the “no smile” rule. To be deductible, the principal purpose of the meeting must be to further charitable goals (aka operative mission). Which, if you think about it, is something worth smiling about!

2 girls "no-smile rule"

Any questions as to what donors can and can’t deduct? If you’re a nonprofit organization you may have questions about the extent of information you’re required to provide. I welcome any questions on the topics and can be easily reached by phone at 515-371-6077; by email at gordon@gordonfischerlawfirm.com.

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Volunteering time NOT tax deductible, but out-of-pocket expenses ARE

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hands in huddle

Did you know that April is National Volunteer Month? Celebrate and make an impact at the same time by donating your time, energy, and skills to the causes you care most about.

However, unlike the charitable contribution deduction on federal income tax for cash and non-cash assets, the IRS does not count volunteering time as a part of that deduction. However, out-of-pocket expenses relating to volunteering are deductible.

Out-of-pocket expenses are deductible if the expenses are:

  • unreimbursed;
  • directly connected with the services;
  • expenses you had only because of the services you gave; and
  • not personal, living, or family expenses.

Out-of-pocket charitable expenses which might be deductible include the cost of transportation (including parking fees); travel expenses while you are away from home performing services for a charitable organization; unreimbursed uniforms or other related clothing worn as part of your charitable service; and supplies used in the performance of your services.

As with other donations, keep good records…documentation is key!

love your neighbor hat

If you have any questions I would love to be of assistance. (After all, the mission at Gordon Fischer Law Firm is to maximize charitable giving, which certainly includes volunteer time!) Reach out to me at any time via email or by phone (515-371-6077)

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