I found this interesting FAQ on the U.S. Department of Treasury website (emphasis added):
Question: There is much talk about encouraging people to volunteer their time to help organizations that provide community services. Shouldn’t people who do volunteer work be provided with a tax deduction to compensate them for their donation?
Answer: Under current law, volunteers are prohibited from taking a charitable contribution deduction for the value of the services they provided to charities. However, the tax code does support volunteer work for charitable organizations by allowing volunteers to take a charitable contribution deduction for expenses they incur in connection with their volunteer services, but the expenses must be ones the charity would otherwise have to incur, not personal expenses of the volunteer. For example, volunteers may deduct the cost of materials they donate for use in repairs to a church, supplies they use in leading activities at a day care center, or uniforms they wear when serving as nurses’ aides. However, volunteers may not deduct personal expenses such as meals eaten during a break in a local service project, transportation to and from a school where they donate their time, or child care expenses.
Taxpayers occasionally ask me if they can deduct the value of their volunteer labor. The answer, as shown above, is an easy one: “No.” But when they ask the obvious follow-up question, “how come”, I start mumbling like a Dick Tracy villain. I usually end up giving them some version of the classic frustrated mother’s reply, “because I said so.”
“Because that’s the law”, I feebly say and hurriedly move on to the next topic. The taxpayer usually accepts the answer, but I am left with nagging doubts: Why is that the law? Doesn’t the allowance of a deduction for material contributions made to charity and the disallowance of a deduction for non-material (i.e. labor) contributions made to charity unfairly favor the rich?
If President Obama – a community organizer himself – truly wants to encourage Americans to serve their communities, wouldn’t he favor some sort of tax deduction or tax break for people who give their time rather than their money and property to charity?
I favor an approach that levels the playing field between rich and non-rich benefactors for three reasons:
- It would reduce the size of the federal government by shifting public funds to private charity (where, I believe, they’ll be better spent);
- It would encourage people to volunteer and get more involved in their communities;
- It would end the government sanctioned preference for material contributions over labor contributions.
The amount of deduction could be set by statute to avoid arbitrary valuation problems. For example, every hour of qualified charity work the taxpayer contributes might be allowed a $20 charitable contribution deduction. Of course, strict rules would have to be formulated to combat fraud and abuse, but this could be accomplished by a careful wording of the statute.
What do you think of this idea? Brainy or bird brainy?
4 responses so far ↓
1 Rich // Jan 31, 2010 at 3:10 pm
“Brainy” , but like anything it could use some tweeks. You have inspired me. I am a twenty-something with three years + experience in the non-profit sector. I came across you posting while doing research for my Volunteer and Staff Management course. I think your idea could really turn the tide on the current American idea of self worth. Being a recipient and deliverer of social services, I really agree with this. Don’t hesitate to email me more about the topic.
2 Peter // Jan 31, 2010 at 3:57 pm
Hi Rich,
Thanks for visiting.
We shouldn’t measure peoples’ philanthropic spirit only by dollars.
Keep up the good work.
3 Brian // Aug 28, 2010 at 2:58 pm
I really like the idea of a tax deduction for valuable labor. It seems to make sense to us mere mortals that providing labor to repair an item for a charitable organization should be just as valuable as providing money that they can spend to hire someone else (who’s not volunteering) to come and fix the very same item.
I know of a number of fulltime RVers who do volunteer work, many of which are retired. But I also know of quite a few others who would likely do more volunteering if there were some measure of compensation (tax deduction) in return.
People are often willing to give of their time but have bills to pay. And in that light, it’s often easier to work at a job, send the dollars and get the full tax deduction even if they could physically do the work those dollars would provide for better, faster or more efficiently.
Welcome to IRS tax code. No one said it would actually make sense.
Just an opinion…
4 Ironkraft // May 22, 2011 at 6:27 pm
I’m a contractor. During past year I’ve executed several weeks of /unpaid=volunteer /labor ( for some I paid all materials too) for the curch I am a member. The church undergoes a big extention and a remodeling process: all labor is done by the members of the church who are owners , such as me, of construction related services. The cedar shingles siding I installed as well as the refinish of an antique hand carved oak wood front door , both executed in exclusivity by me, would worth if done with an invoice more than $3000 in labor only, beside the materials. There should be a way to have this labor deducted .Should I do an invoice to the church for the value of this labor , accept the pay and than donate back the received money or what would be the best way to have this labor considered as deductible donation. The final rezult of our volunteer work is a new building with an appraised value of $640000 compare to the original $200000. All the work from specialty trade/electrical plumbing AC to various trade; carpenter, masonry, hardwood floors trim windows install, is done by the members of this church.I amreding above and see that there is no hope to have this work deducted?? This is not fair! I gave up while working as volunteer to several opportunities to work on other contracts which would have brought me income
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