Tax Issues for Private Individuals
A. Gifts and Charitable Donations
Gifts and charitable donations are tax deductible for the donor. As noted in “Responsibility for Acknowledging Gifts and In Kind Donations,” the donor must have a written acknowledgment of individual gifts of $250 or more. The donor is also responsible for establishing the value of non-cash donations.
B. Personal Income from 4-H projects
- Professional Services: An individual paid $600 or more in a calendar year (January 1st–December 31st) from a 4-H organization will receive an IRS Form 1099 (see “Responsibility for Paying Taxes on Raffle Proceeds”). This income must be reported with personal tax returns.
- Youth Projects: The auction of an animal or other 4-H project can generate income for the 4-H youth participant. This income is not subject to sales tax (due to casual and isolated sale provision), nor income tax due to the age and/or income of the 4-H youth.
C. Out-of-Pocket Expenses
As a coordinator or leader of a 4-H club, you may be able to deduct some of the amounts you pay in giving services to the organization. The amounts must be:
- Unreimbursed. You cannot be subsequently repaid for these costs by another source.
- Directly connected with the services you provided.
- Expenses you had only because of the services you gave.
- Not personal, living, or family expenses.
Common questions:
1. What out-of-pocket expenses can generally be deducted?
- Underprivileged youths selected by charity: You can deduct reasonable unreimbursed out-of-pocket expenses you pay to allow underprivileged youths to attend fairs, movies, or similar events. The youths must be selected by a charitable organization whose goal is to reduce juvenile delinquency. Your own similar expenses in accompanying the youths are not deductible.
- Conventions: If you are a chosen representative attending a convention (or similar event) of a qualified organization, you can deduct unreimbursed expenses for travel and transportation, including a reasonable amount for meals and lodging, while away from home overnight in connection with the convention. However, you cannot deduct personal expenses for sightseeing, theater tickets, or entertainment. You also cannot deduct travel, meals, lodging, and other expenses for your spouse or children.
- Car Expenses: You can deduct unreimbursed out-of-pocket expenses, such as the cost of gas and oil, that are directly related to the use of your car in giving services to a charitable organization. You cannot deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance. If you do not want to deduct your actual expenses, you can use a standard mileage rate to figure your contribution. See the instructions for Schedule A (Form 1040) to find the rate for the year you claim the deduction. You can deduct parking fees and tolls, whether you use your actual expenses or the standard mileage rate. You must keep reliable written records of your car expenses.
Records to Keep: If you claim expenses directly related to use of your car in giving services to a qualified organization, you must keep reliable written records of your expenses. Whether your records are considered reliable depends on the facts and circumstances. Generally, they may be considered reliable if you made them regularly and at or near the time you had the expenses. Your records must show the name of the organization you were serving and the date each time you used your car for a charitable purpose. If you use the standard mileage rate, your records must show the miles you drove your car for the charitable purpose. If you deduct your actual expenses, your records must show the costs of operating the car that are directly related to a charitable purpose.
- Travel: Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. This applies whether you pay the expenses directly or indirectly. You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses. The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses.
- Daily allowance (per diem): If you provide services for a charitable organization and receive a daily allowance to cover reasonable travel expenses, including meals and lodging while away from home overnight, you must include in income the amount of the allowance that is more than your deductible travel expenses. You can deduct your necessary travel expenses that are more than the allowance. Deductible travel expenses include:
- Air, rail, and bus transportation,
- Out-of-pocket expenses for your car,
- Taxi fares or other costs of transportation between the airport or station and your hotel,
- Lodging costs, and
- The cost of meals.
Because these travel expenses are not business-related, they are not subject to the same limits as business related expenses.
2. What expenses cannot be deducted?
The value of your time or services cannot be deducted.
Costs incurred not relating to the organization that allow you to participate or give time, such as paying a baby-sitter to watch your children while doing volunteer work for a qualified organization, cannot be deducted.
For further information see IRS Publication 526: Charitable Publications
