Question:
A church regularly sends out teams on short-term mission trips to destinations hosted by charitable organizations. They have set up a fund for receiving special offerings and for reimbursing travel, meals, and lodging expenses. Recently, a church team was required to pay the hosting organization a fee for each member to cover meals and lodging. The team leader required each team member to make a donation to the fund in the amount of the fee. Are these donations tax deductible?
Some argue that the team members are receiving a benefit from the donation and should not receive a tax benefit for the donations. Others feel they should qualify for a charitable donation because the benefit they receive only facilitates their charitable work. Besides, can't these expenses be deducted on the individual's Schedule A as out-of-pocket contributions even if the church doesn't consider them a donation?
Answer:
IRS Publication 526 says, "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."
Churches and mission trip members will have to decide for themselves if they were "on duty" throughout the trip or if they were simply performing nominal/no duties for a significant part of the trip. However, it is likely in the stated situation above that the amounts paid represent tax-deductible contributions.
Reader Question/Comment 2: Normally, we would provide the individual who went on the trip with a contribution statement, but we can't really include the mission trip on that statement since we are listing they did not receive any goods or services for these gifts. What is the best way to handle this? Do we give them a letter that says they participated in the mission trip and how much they paid? If so, would this become their responsibility to determine what amount, if any, is deductible?
The quid pro quo statement "that no goods or services were received in exchange for these donations" relates to services received of the nature of a personal benefit to the donor. Receiving "services" to facilitate travel for charitable endeavors are not considered personal in nature.
Regardless, the individuals are permitted to deduct travel expenses incurred for charitable purposes without processing their funds through a charitable organization. Nevertheless, a letter, as suggested in the question, may be helpful to establish that the trip was for charitable purposes.
On the other hand, if the donor were to receive souvenirs in exchange for their travel expenses, that would reduce their deductibility.
A church regularly sends out teams on short-term mission trips to destinations hosted by charitable organizations. They have set up a fund for receiving special offerings and for reimbursing travel, meals, and lodging expenses. Recently, a church team was required to pay the hosting organization a fee for each member to cover meals and lodging. The team leader required each team member to make a donation to the fund in the amount of the fee. Are these donations tax deductible?
Some argue that the team members are receiving a benefit from the donation and should not receive a tax benefit for the donations. Others feel they should qualify for a charitable donation because the benefit they receive only facilitates their charitable work. Besides, can't these expenses be deducted on the individual's Schedule A as out-of-pocket contributions even if the church doesn't consider them a donation?
Answer:
IRS Publication 526 says, "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."
Churches and mission trip members will have to decide for themselves if they were "on duty" throughout the trip or if they were simply performing nominal/no duties for a significant part of the trip. However, it is likely in the stated situation above that the amounts paid represent tax-deductible contributions.
Readers have sometimes been helped by the following discussions:
Reader Question/Comment 1: Does this same deduction also include out-of-pocket expenses paid to a pharmacy for vaccinations (the reader cited malaria vaccination) required for the trip? These vaccinations were paid directly to the pharmacy and not through the church.
According to the Federal Tax Regulations and recent court cases, there is nothing directly stated about the out-of-pocket expenses for vaccinations, but Federal Tax Regulation section 1.170A-1(g) does provide some guidance: "Unreimbursed expenditures made incident to the rendition of services to [a charitable] organization … may constitute a deductible contribution. For example, the cost of a uniform without general utility which is required to be worn in performing donated services is deductible."
Expenses which were incurred as a result of performing services to a charitable organization would appear to be deductible.
Reader Question/Comment 2: Normally, we would provide the individual who went on the trip with a contribution statement, but we can't really include the mission trip on that statement since we are listing they did not receive any goods or services for these gifts. What is the best way to handle this? Do we give them a letter that says they participated in the mission trip and how much they paid? If so, would this become their responsibility to determine what amount, if any, is deductible?
The quid pro quo statement "that no goods or services were received in exchange for these donations" relates to services received of the nature of a personal benefit to the donor. Receiving "services" to facilitate travel for charitable endeavors are not considered personal in nature.
Regardless, the individuals are permitted to deduct travel expenses incurred for charitable purposes without processing their funds through a charitable organization. Nevertheless, a letter, as suggested in the question, may be helpful to establish that the trip was for charitable purposes.
On the other hand, if the donor were to receive souvenirs in exchange for their travel expenses, that would reduce their deductibility.
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