Sunday, August 12, 2007

THE RIGHT THING: A NOT-SO-ELEMENTARY DEDUCTION

The U.S. Department of Labor estimates that almost 61.2 million people, or 26.7 percent of the American population, did volunteer work last year. Nearly 12 million Canadians, or 45 percent of that country's population, volunteered in 2004, according to the most recent Statistics Canada survey. (See Volunteering in the United States, 2006 and Canada Survey of Giving.) Clearly North Americans are contributing billions of hours of time to causes which they care about.

When people volunteer, most often, it's a relatively straightforward affair. They get involved with a nonprofit organization and find out its needs. If they can fill any of those needs, they step in. No fuss, no muss.

It's particularly gratifying when someone with professional skills turns up at a nonprofit which needs those skills. If that person is willing to donate his/her time and services, the nonprofit can get the work it needs done without paying market rates for those services.

A reader in Massachusetts who is a graphic designer finds herself in exactly that sort of a relationship with her local public school. She donates design services for programs, handbooks, directories and other materials that the school needs and would otherwise have to pay a pretty penny to get.

"I've been told that I can write off that time," my reader writes, "if I send an invoice for the time but show it as a donation. Then the school would send me an acknowledgment letter for me to use at tax time."

My reader is struggling, however, with the fact that many parents give the school similar amounts of time and effort in other ways, without being able to write it off on their taxes. She wonders if it's ethical to ask about a tax write-off for her volunteer efforts when so many others are working for no financial benefit.

As a practical matter, she needn't worry. While she can deduct the cost of supplies, mileage, postage and other out-of-pocket expenses associated with the donation of her graphic designs, she can't deduct the value of her time or her services. It's nothing personal -- Anthony Burke, a public-affairs specialist with the Internal Revenue Service, assures me that the IRS doesn't allow anyone to make such deductions. What's allowed and not allowed is spelled out in
Publication 526 (2006), Charitable Contributions at http://www.irs.gov/.

But my reader wants ethical counsel, not tax advice. If such a deduction were available, would asking about it taint her good service to the school? Does thinking about a possible monetary upside lessen the magnanimous spirit with which she has given of her talents?

Again, no worries. She's volunteering out of the goodness of her heart, not as a tax shelter -- her curiosity about the possible tax advantages is an afterthought, spurred by someone else's recommendation. It doesn't for a minute diminish the value of the professional work she donates to the school, and the school still gets the benefit of her work, whether or not she comes out with a tax deduction.

The right thing for her to do is to continue volunteering and donating her design services for as long as she and the school find it rewarding.

She'd also be wise to consider keeping track of any out-of-pocket expenses associated with her donated services that may be tax deductible. If she's concerned about whether or not other parents know that such expenses can be deducted, by her or by them, she should bring it up at a parent-group meeting.

To make sure that they get the tax facts correct, she and her fellow volunteers might consider asking a parent who is a tax professional to volunteer to provide accurate advice. With so many millions of volunteers out there, there's bound to be a tax pro who's willing to step up.


c.2007 The New York Times Syndicate (Distributed by The New York Times Syndicate)

3 comments:

Anonymous said...

How many of the volunteers at the school have children (or grandchildren) enrolled in the school? In my experience, volunteers at schools are there for the benefit of their children........and that their efforts benefit other children and the school in general as well is secondary. So in my opinion, it would not be ethical to deduct the value of time from income taxes. The writer is following Adam Smith's basic rule of capitalism: Everyone acts in his (her) own best interests.

Anonymous said...

I don't believe the reader who is a graphic designer should feel badly about taking a tax write-off for her contributions of time and materials to the school district. Although the school district is not a 501 (c) 3 charitable organization, the reader's status as a business owner gives her the ability to take certain tax deductions when contributing time and materials related to her vocation. The same is not true for those folks who merely want to donate their resources to the school district; donating valuable time and resources is reward enough for most people. Reader runs a business and her contributions actually erode away her business profits--after all, she didn't receive the donated items for free.

Mike Padore
Irvine, CA

Anonymous said...

I commend the reader and anyone who volunteers. I am a strong believer in giving back to the community (I was a big sister for 7 years) and the satisfaction that I got from knowing I was making a difference in one person's life was all the payment I needed. If everyone gave of their time, what a wonderful world we would have.

Deanne Dillenbeck, CFCM

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