Question:
A family works with a ministry that serves orphans in several foreign countries. Many individuals and families travel to fulfill short-term missions projects each year. Parents typically bring their children who help with painting, cleaning, etc. There is no element of vacation associated with the trip. Can expenses for the family trip be deducted if paid directly by the family (airfare, etc) or does the ministry need to pay these expenses directly and be reimbursed in essence by the family to be deductible?
Answer:
IRS Publication 526 addresses "Out-of-Pocket Expenses in Giving Services" and travel costs.
First, let's consider four principles that the Publication highlights:
"Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. The amounts must be 1) unreimbursed, 2) directly connected with the services, 3) expenses you had only because of the services you gave, and 4) not personal, living, or family expenses."
Car expenses can be deducted at 14 cents per mile (2009 rate) for documented charitable miles.
Regarding travel expenses specifically, Publication 526 states:
"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."
The Publication lists the following expenses as deductible: "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."
Interpretation:
It seems to me that parents must carefully weigh all facts and circumstances to determine whether charitable deductions are appropriate for the expenses they incur on behalf of their children. The Publication does provide several examples of activities that the IRS believes qualify or do not qualify. If these tests can be passed, then a charitable deduction claimed on Schedule A (Form 1040) is appropriate. This is true regardless whether the payments were made directly by the taxpayer or indirectly through the charitable organization. Often, it is important for the organization to be involved in the disbursement of funds because it must provide stewardship over monies donated both by those traveling to serve and by those who contribute toward these expenses (often called "sponsors").
A family works with a ministry that serves orphans in several foreign countries. Many individuals and families travel to fulfill short-term missions projects each year. Parents typically bring their children who help with painting, cleaning, etc. There is no element of vacation associated with the trip. Can expenses for the family trip be deducted if paid directly by the family (airfare, etc) or does the ministry need to pay these expenses directly and be reimbursed in essence by the family to be deductible?
Answer:
IRS Publication 526 addresses "Out-of-Pocket Expenses in Giving Services" and travel costs.
First, let's consider four principles that the Publication highlights:
"Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. The amounts must be 1) unreimbursed, 2) directly connected with the services, 3) expenses you had only because of the services you gave, and 4) not personal, living, or family expenses."
Car expenses can be deducted at 14 cents per mile (2009 rate) for documented charitable miles.
Regarding travel expenses specifically, Publication 526 states:
"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."
The Publication lists the following expenses as deductible: "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."
Interpretation:
It seems to me that parents must carefully weigh all facts and circumstances to determine whether charitable deductions are appropriate for the expenses they incur on behalf of their children. The Publication does provide several examples of activities that the IRS believes qualify or do not qualify. If these tests can be passed, then a charitable deduction claimed on Schedule A (Form 1040) is appropriate. This is true regardless whether the payments were made directly by the taxpayer or indirectly through the charitable organization. Often, it is important for the organization to be involved in the disbursement of funds because it must provide stewardship over monies donated both by those traveling to serve and by those who contribute toward these expenses (often called "sponsors").
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