Americans love giving back. In 2017, 77.34 million American adults volunteered through an organization and gave a collective 6.9 billion hours of their time. Their volunteering hours generated $167 billion in economic value, but none of them got a paycheck.
If you are a charity that relies on volunteers, then you can either reimburse them for their expenses or allow them to deduct costs from their income taxes.
To help you, here’s our guide to reimbursing volunteer mileage and expenses. Some questions we cover are - how does the volunteer mileage rate work, and what do you and your volunteers need to do for reimbursement or deductions? Let’s dive in!
The volunteer mileage rate for all service beginning January 1, 2019, is $0.14 per mile driven. There was no change from the 2018 rate.
The rate won't mean much for a one-off volunteer session. However, if you use many volunteers or you have a few volunteers who come in frequently, it adds up. One hundred miles a month can earn you a deduction of $168 for the year.
As a charity, you may find the cost snowballs because:
As a charity, you can reimburse your volunteers up to the federal volunteer mileage rate or for the use of their car (with provided receipts).
That means you can reimburse volunteers $0.08 or $0.14 but not over $0.14.
If you give them more than the federal rate, it counts as income for the volunteer. As long as you reimburse them adequately, there should be no tax consequences for either of you. Additionally, as long as you follow the IRS guidelines, you don't even need to report reimbursements to the IRS.
The IRS considers miles driven in service of registered charities to be a charitable contribution as long as the charity doesn't reimburse the volunteer.
As a result, volunteers can deduct it on Schedule A (Form 1040) along with any qualifying cash donations and other expenses.
Volunteers can also deduct:
In some cases, these deductions work as they do for unreimbursed business expenses. However, strict rules govern these deductions. Anything that looks like a volunteering vacation is particularly tricky. So, volunteers should consult their accountant before trying to add them to their returns.
According to the IRS, volunteers can seek reimbursement for out-of-pocket expenses. This includes mileage or gas, and oil. Volunteers can deduct parking and toll no matter what type of reporting they choose.
You can offer reimbursement for any of these items, and the decision is yours to make. In most cases, volunteers pay the expenses and then submit a receipt for cash reimbursement. You can also offer advance payment to cover the costs. Ensure you do not pay the amount more than a month in advance before the expense applies.
1. General repair and maintenance don't count, no matter how often they volunteer.
2. If you don't reimburse the volunteer, they can write them off their taxes at the full federal mileage rage using the Form 1040.
To keep a record of charitable car expenses volunteers need to stay up-to-date with spending as it happens. Usually, you need to record your expenses as close to the time of the expenditure as possible. Also, the IRS requires "reliable" records for both charities and their volunteers.
If recording mileage, volunteers should record:
Ideally, volunteers should also record the odometer at the start and end of a trip. However, the IRS puts less of an emphasis on recording charitable car expenses than it does business expenses.
If your charity (or volunteer) uses the standard vehicle deduction, you need to keep the receipts in place. You should also label the receipt by stating the date you used the car for charity, the name of the organization or volunteer, and the mileage.
Expense reports help charities manage all of these receipts and costs.
The Tax Cuts and Jobs Act of 2017 attempted to eliminate the idea of itemized expenses for W-2 workers. Volunteers can still write off charitable deductions, but many others are gone.
This is because itemizing means volunteers lose the standard deductions. Many volunteers won't be able to claim their expenses without negatively impacting their tax burden.
If your charity can afford to reimburse volunteers for their expenses, this is the time to do it. It can attract volunteers and fairly compensate people who spend money to help your organization run.
Volunteers using their car in aid of a charity or during their volunteer work can write off either their miles or their actual costs (gasoline) via the IRS volunteer mileage rate. Alternatively, your charity can reimburse them for the cases, which attracts volunteers and makes reporting simple.
Reimbursing volunteers isn't easy. It requires you to sift through a lot of paperwork quickly because volunteers can't - and shouldn't - wait months to be fairly reimbursed.
Are you a charity looking for a more straightforward way to pay back your volunteers? We can make your expense management easier with our easy-to-use reporting systems. Schedule a demo to learn how our accountable expense reporting can eliminate fraud and create faster reimbursements for volunteers.