Have you ever gone to a management retreat for, say your local church, educational or other 501(c)(3) group for which you paid all your expenses? Food, lodging, transportation and similar expenses are often picked up as personal expenses by the volunteers attending functions for 501(c)(3) groups instead of the groups paying for the volunteers expenses.
If this sounds like you, did you deduct the cost of those trips as charitable contributions? If not, why not? Could it be that no one told you that trip to Disney World for the XYZ Children’s Annual Board Meeting was a deductible expenditure? Let’s take a look at how you might have been able to save on taxes and still enjoy all that Disney World can offer.
First, we will make a few assumptions. You went to Disney World from December 6-11, 2004. You, your husband, your 7 year-old and your 9 year-old go on the trip. The total cost of your trip was $5,000, which included the following:
|Airfare for all||$1,500.00|
|Tickets to parks||$800.00|
The board meeting started on December 7, 2004 and ended December 10, 2004. The organization is a 501(c)(3) entity of which you are the Secretary-Treasurer (i.e., you had to be at the meeting). The board and committee meetings lasted 8 hours each day. You are the only board member of the organization in your family.
What kind of deduction do you think you may be able to claim? Let’s find out.
Let’s start with the easy stuff. As focused on family life as Uncle Sam is, he still won’t allow you to write off the cost of the park tickets. Since the cost of food was split evenly amongst the four of you, we can also kick out 75% of meals cost. You might as well forget about the cost of airfare for anyone but you also. Ok, so let’s see where that puts us. We are left with the following costs for which we have not yet accounted:
|Airfare for you||$ 375.00|
How much of what is left do we have available as a deduction? As it turns out, as long as you did not receive reimbursement for any of the above items, all of them are allowable as itemized deductions. That’s because these expenditures relate directly to you and would have been incurred regardless of whether your spouse and children accompanied you. That’s a total of $2,393.75 out of $5,000 that will save you on your income tax bill. Assuming your combined federal and state tax rate is 34%, by classifying your expenditures to what they really were - costs of contributed services - you saved about $800 on your tax bill. In addition to the preceding, you also would have available the fourteen cents a mile deduction for the personal use of your car going to and from the airport.
This is a case of the first impression not necessarily being the right impression. You may have thought these were just vacation expenses, but in reality, you incurred deductible expenses in the service of your charitable organization. Rethink your vacations over the past few years. Could you be losing some charitable deductions? If you think you may have a case for a deduction, give us a call. We will be happy to sit down and take a look at the possibilities for you.
Have a great October!