Author Archives: Cecil

Doing volunteer work for a charity?

For many individuals, volunteering for a charitable organization is a very emotionally rewarding experience. In some cases, your volunteer activities may also qualify for certain federal tax breaks. Although individuals cannot deduct the value of their labor on behalf of a charitable organization, they may be eligible for other tax-related benefits.

Before claiming any charity-related tax benefit, whether for a donation or volunteer activity, you must determine if the charity is a “qualified organization.”  Under the tax rules, most charitable organizations, other than churches, must apply to the IRS to become a qualified organization. If you are uncertain about an organization’s status as a qualified organization, you can ask the charity. The IRS has a toll-free number (1-877-829-5500) for questions from taxpayers about charities and also maintains an online tool at www.irs.gov/charities. Publication 78 lists all of the qualified charities.

 Time or services

An individual may spend 10, 20, 30 or more hours a week volunteering for a charitable organization. Precisely because the individual is a volunteer, he or she receives no remuneration for his or her time or services and cannot deduct the value of his or her time or services spent on activities for the charitable organization. Unpaid volunteer work is not tax deductible.

 Vehicle expenses

Vehicle expenses associated with volunteer activity should not be overlooked.  For example, many individuals use their personal vehicles to transport others to medical treatment or to deliver food to shut-ins. Taxpayers can deduct as a charitable contribution qualified unreimbursed out-of-pocket expenses, such as the cost of gas and oil, directly related to the use of their vehicle in giving services to a charitable organization. However, certain expenses, such as registration fees, or the costs of tires or insurance, are not deductible.  Alternatively, taxpayers can use a standard mileage rate of 14 cents per mile to calculate the amount of their contribution. Do not confuse the charitable mileage rate, which is set by statute, with business mileage rate (56.5 cents per mile for 2013), which generally changes from year to year. Parking fees and tolls are deductible whether the taxpayer uses the actual expense method or the standard mileage rate.

 Uniforms

Some volunteers are required to wear a uniform, such as a jacket that identifies the wearer as a volunteer for the charitable organization, while engaged in activity for the charity. In this case, the tax rules generally allow taxpayers to deduct the cost and upkeep of uniforms that are not suitable for everyday use and that the taxpayer must wear while performing donated services for a charitable organization.

 Hosting a foreign student

Qualifying expenses for a foreign student who lives in the taxpayer’s home, as part of a program of the organization to provide educational opportunities for the student may be deductible. The student must not be a relative, such as a child or stepchild, or dependent of the taxpayer and also must be a full-time student in secondary school or any lower grade at a school in the U.S. Among the expenses that may be deductible are the costs of food and certain transportation spent on behalf of the student. The cost of lodging is not deductible. If you are planning to host a foreign-exchange student, please contact our office and we can explore the possible tax benefits.

 Travel

Volunteers may be asked to travel on behalf of the charitable organization, for example, to attend a convention or meeting. Generally, qualified unreimbursed expenses may be deductible subject to complicated rules. Very broadly speaking, there must not be a significant element of personal pleasure, recreation, or vacation in the travel. Special rules apply if the charitable organization pays a daily travel allowance to the volunteer. There are also special rules for attendance at a church meeting or convention and the capacity in which the volunteer attends the church meeting or convention. If you plan to travel as part of your volunteer activity for a charitable organization, please contact our office and we can review your plans in greater detail.

 If you have any questions, please contact our office.

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 Pursuant to US Treasury Department Regulations, you are advised that any information and advice, including any attachments and enclosures, may not be used for the purpose of (i) avoiding any tax liabilities and or penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to any other person(s) any tax-related matters addressed herein.

 

 

 

The Child Tax Credit

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The Child Tax Credit

 

 If you have children, you know what a blessing they can be, especially during tax time. If you have dependent children, you may be able to claim a child tax credit of up to $1,000 per qualifying child for 2013.

 

A qualifying child must be under age 17 as of the end of 2013 and be either a U.S. citizen or resident alien. A qualifying child also must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew); have lived with you for more than one-half of 2013; not have provided over half of his or her support; and must be claimed as a dependent on your income tax return. “Adopted child” includes a child placed with you for adoption even if the adoption has not been finalized. A foster child must have lived with you the entire year to qualify, unless the child was born or died during the year.

 

Like most of the tax credits and other breaks that have been enacted lately, there is an income limitation on the people who can claim this credit. The phaseout of the credit begins at modified adjusted gross income (AGI) of $110,000 for joint filers, $75,000 for singles and heads of household, and $55,000 for marrieds filing separately. You will lose $50 of your total child credit for each $1,000 (or fraction of $1,000) of your modified AGI that exceeds the applicable threshold. For this purpose, modified AGI includes the amount shown on Line 37 of Form 1040 or Line 21 of Form 1040A, plus any foreign earned income exclusion, foreign housing exclusion, and income from U.S. possessions, if any.

 

 Please contact our office for further information on this credit and other available credits