Tax topic: charitable tax deduction tips

Volunteer work is a valuable and important contribution to the community, it helps other people and makes you feel good. There are many ways of volunteering and they don’t have to involve being a candy striper at your local hospital. Many organizations need not only goods, but, professional services that can’t be provided by just anyone. If you are a professional or provide a service in your work, you can use your talents or provide your goods for volunteer work. If, for example, you are a lawyer, you can volunteer legal services to an organization. Likewise, if your company manufactures a product, it can be donated for a tax break. From babysitting to bookkeeping, you can contribute to your community. Though the most commonly deducted donations are monetary contributions, billable services and goods can also be used as tax-deductible donations if you keep good records and know your tax laws.

First, you need to determine if the organization you wish to donate your services to is eligible to receive tax deductible contributions. If your organization can’t give you the information you need, you can search for the company or organization’s name at the IRS’ web site. Most organizations are well established and will know if they are eligible to receive your goods and services for a tax deduction. Being tax-exempt does not mean the same thing as tax deductible, so be sure you have the correct information before you start. If your organization is not eligible to receive tax- deductible donations, they can apply through the IRS to become a 501(c)(3) organization. Most religious organizations are eligible for tax-deductible donations but are not required to register.

Keep record of every billable hour you work for your organization and provide receipts to your organization, keeping copies for your own tax records. If you don’t know how much to charge for your services, ask around at different companies or other folks who do the same job to get an idea how much is fair to deduct. Ask your accountant or IRS representative what percentage of your services can be deducted and if there is a limit. Depending upon your organization, you can deduct anywhere from 30 to 50 percent of your donation. Be sure to have all of your receipts available when it is tax time and in case of the dreaded audit.

Not only do volunteering goods and services provide a great tax deduction, it can also look good for your company’s record. Organizations often publicly acknowledge their benefactors; which brings you great publicity and more customers. People also like to patronize companies and professionals who are involved in the improvement of the community and will want to show their support for you by using your service or product.

Make it a regular policy to contribute whatever you can and try to get your employees involved as well. Often, people want to help but just don’t know how or what they can do. Provide a good example and a little direction and make a difference in your community.