What Is The Value Of Volunteer Time?
Volunteers CANNOT be given a tax-deduction based on their hours, but they CAN be given a tax-deduction on a number of other items, such as travel expenses, uniforms, donates supplies, etc. as long as the nonprofit is a registered IRS Tax-exempt 501(c)3. Well, and a few additional things that we will outline in this episode.
Your nonprofit should keep a log of hours as you CAN use this as a value for matching grants (when they allow you to use an in-kind soft match) and it can go into the overall operating budget of your organization. The feds will not give these individuals a tax-break for their time per se, but they will allow the value of volunteer hours to be considered as a nonfederal in-kind match (which the hours must be documented and show a value).
Your nonprofit should also insert these volunteer hours into your budget to show the REAL cost (although still keep it separated in its own category as you are not paying fringe benefits or have real expenses balanced) of what it takes to run the entire program.
Furthermore, it still stands that tracking volunteer hours and contributions is great to publish on your website. This really accounts for the community involvement with your nonprofit. Also, you can also still give letters to volunteers to showcase their contribution to your nonprofit as it builds morale.
Tax-Deductions for Volunteers
So, tracking time, even though the individual cannot use it for their tax deductions, should be done! If your nonprofit gets a grant for $100,000 and a 20% in-kind match is required (roughly $20,000 value), then the time that volunteers contribute to your nonprofit for that grant can be used as a value. It is that awesome and important! Of course, you need to make sure you use logs or a system to track this time so that you can include it as a value. For example, if a volunteer’s time is valued at $20 per hour and they contribute 100 hours to working at your nonprofit, then that is $2,000 that can go towards that $20,000! If you have 10 volunteers at the same value and time commitment, then there is your in-kind match! How cool is that?
One way to look at the monetary value for volunteer time for matching purposes in grant writing it to take a look at the Independent Sectors yearly value breakdown. You can look at the national average or look into the value state-by-state. However, this is a general amount. If you have specialized pro bono assistance, from let’s say a lawyer, you will need to base the value of their time on what their fees for services and use that amount.
I have included some sample templates to track time in the Funding Toolkit, so if you have not downloaded it yet, go ahead and do it now!
Before you submit a grant, you should have a letter signed by the volunteer that clearly articulates the number of hours and the value of those hours that are committed to the grant project. This is great for two main reasons:
- Many individuals are asked to volunteer for projects and give a verbal, “Okay, sure,” as there is not a 100% chance that the grant will be funded. However, once the grant is funded they may forget that they verbally committed or that they committed a substantial amount of time. This happens. A signed guarantee on the other hand is really a sign of commitment that is solid and both parties understand the clear expectations.
- Another reason is that reviewers like to see the signed proof in a grant application. If they don’t see a signed letter, then they may not take your in-kind seriously, or think that you can realistically achieve the volunteer contribution time.
Going back to tax-deductions. Once again I am not a lawyer!
What CAN Volunteers Deduct?
Travel: Travel expenses for away-from-home when performing services for a tax-exempt nonprofit. These include out-of-pocket round-trip travel costs, taxi fares, and other transportation costs, plus meals and lodging.
There are a couple of red flags here. If a primary portion of your trip was for pleasure and only a tiny fraction was for the charity, then it becomes pretty sticky. For instance, if you are taking a month’s holiday and spend one day at a conference, then you can’t write off all your expenses! You could write-off the cost of the conference, but not your travel expenses. The other red flag is if the conference isn’t a conference after all, but you are lobbying. Unfortunately, lobbying for your nonprofit is not acceptable for tax-deductions, either!
Gas & Mileage: Staying on the same wave as traveling, a volunteer can also deduct the cost of gas and oil when using their car for nonprofit-related activities. Volunteers use a standard tax-deduction for 14 cents per mile driven in service of charitable organizations. Now if you submit receipts for out-of-pocket travel costs and get reimbursed from the nonprofit, then you cannot claim this for your tax deductions! You already got your money back! That would be double-dipping.
Meals: The cost of wining and dining possible high-end donors are accepted! But, once again there is a red flag. Your own meal is not tax-deductible. Boo. This is the same in many ways for when you have your own business – pay attention to freelance grant writers – that you cannot get tax-deductions for your meals. I know, it’s not fair at all. You are probably using the good ole argument that you wouldn’t go out to that fancy restaurant, or maybe even just to a local diner, if it wasn’t for the donor or possible client. But that’s the rule. You can write off the other person’s meal, but not your own.
Uniforms: You can write off uniforms or clothing needed to be worn for doing work with that nonprofit. This must be certain types of uniforms that cannot be worn for everyday use.
Donated Supplies or Goods: Have you ever donated a couch to a nonprofit’s thrift store? Then make sure you know the value of the good or supply and get a receipt! Or maybe you are teaching an art class at a nonprofit that serves youth and are bringing in supplies for the youth art class. This could be a tax-deductible purchase, be sure to keep your receipts!
Other out-of-pocket expenses: Volunteers may deduct other expenses they incur during their volunteer work. For example, board members might deduct unreimbursed phone, postage, and copying charges associated with preparing for meetings.
Eligibilities for tax deductions
In order for volunteers to really take advantage of tax-exemptions, the following apply:
- The nonprofit organization must be a qualified, IRS-recognized charity.
- Volunteers must itemize their deductions on their tax return (not a 1040EZ form) to get tax-deductions.
- Volunteers must keep documentation of the expenses, such as receipts, logging mileage, etc. This is especially pertinent for expenses that are $250 or more, then you need official documentation.
- Volunteers cannot claim expenses that the nonprofit already reimbursed them for – this is essentially referred to as double-dipping.
- The expenses must be directly related to volunteer work for the nonprofit.
- The expenses do not extend to anyone else, such as for family members that accompany them on trips.
- When in doubt, visit the IRS.
How do you track all this volunteering stuff?
Well, there are some great templates in the Funding Toolkit. Also, I found a really cool app on Turbo Tax that can be used to track allowable volunteer items. So cool!
There you go. Once again, I am NOT a lawyer or CPA, so please consult them when it comes to tax deductions. Sorry again for the mishap, but I am so glad that it was caught and now I was able to give you even more ideas on what is and what is not considered a tax-deduction for volunteers.
Download the Funding Toolkit so you can access how-to track volunteer hours for your nonprofit’s grant matching requirements!