By Sheila Shanker
Published: 6 April 2011
Many attorneys perform pro bono work by donating legal services to nonprofit organizations. They may be asked to review contracts or advise management on payroll and other legal issues. Some lawyers may assume that they can deduct their donated time as a business expense, but that’s not the case.
Donated time by lawyers, CPAs and volunteers cannot be deducted in income tax returns. Depending on your situation, donated goods can be deducted, but never services. The fact that you didn’t get paid has decreased your income, giving you a “break” with taxes.
But not all is lost — you may deduct costs associated with your donated work, such as the actual fuel expenses, or the standard mileage rate of 14 cents per mile. You can also deduct parking fees and tolls. Be sure to keep your receipts and maintain a log with dates and other details to be able to back up the deduction.
Unfortunately, you cannot deduct other car expenses, such as insurance, depreciation, registration fees and maintenance as charitable deductions.
According to IRS publication 526, you may be able to deduct expenses that are:
· Unreimbursed
· Directly related to the services to the organization
· Expenses occurred only because of the service you provided
· Not personal, living or family expenses
Postage, office supplies and other expenses that directly relate to your volunteer work with the organization can be used as deductions. If you host a meeting at your home, you can deduct the cost of food and drinks consumed. In the event of travel, you may deduct reasonable costs of the trip, provided that the travel was done primarily for the nonprofit. The travel deduction may include airfare, lodging, taxis and the cost of meals.
The IRS has the following requirements regarding deductions of volunteer costs, including legal work:
- Have proper records for the expenses
- Obtain a written acknowledgement of the organization, which includes the work you performed, any reimbursement or quid-pro-quo situation, an estimate cost of the services, and a statement that you have received no benefits, except religious ones, if that‘s the case.
- The acknowledgement should be acquired before filing income tax returns
Be aware that you can deduct volunteer costs from your personal income tax returns only when you itemize your expenses. Some individuals may be able to deduct the costs, while others cannot.
Donating your time to a worthy cause can have its own personal benefits, and in some cases helps attorneys with professional development and marketing. If you can deduct at least a portion of your expenses, that may be even better. Keep good records, and if you have expenses of over $250, ask the organization to acknowledge those as donations.
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