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12 June 2018

Tax Tips for Employee Volunteering, Donations and Pro Bono Work

Tax Tips for Employee Volunteering, Donations and Pro Bono Work

Do you reward your philanthropic employees? Maybe you should. Cone Research study found two-thirds of millennials will only work for organizations with strong corporate social responsibility (CSR) values, including a culture of giving back. There are many ways to incorporate giving into the workplace including traditional gift matching, volunteer work days, pro bono projects, among others. The IRS will even reward you with tax deductions if you follow certain rules. Here are a few:

  1. Make sure the donation or work is for a qualified tax-exempt 501c3 organization. Use the new IRS Tax-Exempt Organization Search to find out if the organization you or your employee wants to help is eligible. Of note: There are specific rules disqualifying contributions to political campaigns or PACs.
  2. While “time is money” in many cases, don’t bother trying to deduct the value of the time employees spend volunteering during work hours. The IRS won’t allow it. However, it will allow deductions for travel expenses, including standard mileage, and certain in-kind contributions.
  3. You cannot benefit from the donation. As with personal donations, a charitable business expense cannot provide a substantial business or personal value. The cost of activities such as running ads in a nonprofit’s magazine or taking at-risk kids to a ballgame, therefore cannot be deducted.
  4. If your organization or employees contributed greatly to relief efforts for Hurricane Harvey or other recent natural disasters, some tax deduction restrictions are lifted. However, to be tax deductible, the relief efforts must be for a qualified organization, not directly for affected individuals.
  5. Pro bono work (providing professional services free of charge) share many of these rules, but there could be certain exceptions. For instance, this article talks about the possibility of payroll costs being a tangible, deductible expense since employees are still paid for their time, but it’s a delicate matter that should be treated on a case-by-case basis.
  6. Matching gifts remain a great way to give back. The IRS offers a helpful guide to providing matching gifts. It’s important to maintain good records and, again, to ensure the charitable organizations qualify with the IRS.

A growing number of businesses not only have formal employee volunteer programs, but they also build volunteerism into their corporate values, like San Antonio’s Rackspace and its Rackspace Gives Back Program. Take a look at how other progressive businesses support philanthropic employees and contact us for ideas on how to make your efforts more tax advantageous.

Image Copyright: wavebreakmediamicro / 123RF Stock Photo
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