It’s that time of year. We pull out the shoebox of receipts, gather all the statements, and begin the tedious process of calculating our income tax for the previous year. Now I must admit that the computer and tax software has made things much easier than it was a generation ago, I still remember the days of paper and pencil and trying to decipher incomprehensible IRS forms.
But as we gather our paperwork and complete the annual process, one question always comes to mind: can I deduct this? Believe it or not, if you itemize your deductions, many amateur radio expenses related to volunteer service and charitable goodwill are in fact deductible.
But with any information that is financial and tax based, I must make the following disclaimer: I am not a CPA, I can’t help you file your tax return, and any advice here is for informational purposes only. Please consult a professional for your particular tax situation.
What I do know is that you give your time and money to amateur radio public service, and Uncle Sam wants to give you credit, so let’s dig in.
The IRS Instructions for Schedule A (Form 1040) list the rules for gifts to charities. You can deduct contributions or gifts to organizations that are religious, charitable, education, scientific, or literary in purpose.
Typically for an amateur radio club to be considered as charitable, it needs to be registered as a 501(c)3 non-profit charitable organization. Other groups that are eligible also include the Boy Scouts, Girl Scouts, Red Cross, and Salvation Army. Non-profit hospitals, educational institutions, and government entities are also considered eligible organizations.
The IRS has a search tool for you to check if your preferred charity or group is listed as an exempt organization: https://apps.irs.gov/app/eos/
So what can be donated? Cash donations are deductible. Also deducting property donations and out-of-pocket expenses for volunteer work is allowed. If an individual cash or property gift is more than $250, you will need a statement from the charitable organization acknowledging the donation. Otherwise, it doesn’t matter if you make a big contribution to the organization or lots of little ones throughout the year. Each donation is considered it’s own contribution. So save those receipts to document your donations.
One thing to consider are gifts that you may benefit from. For example, if you went to a charity dinner and the ticket price was $75 and the value of the dinner was $35, you may only deduct $40. Or, if you paid $110 for a $100 gift card at a silent auction, only the $10 over and above the value of the item is deductible. Also club dues and membership fees aren’t tax deductible. But travel expenses can be, which brings us to our next section.
Travel mileage to and from events where you volunteer your time and services are deductible at the rate of $.14 a mile (2016 rate). But travel to a club meeting wouldn’t be deductible, unless there is a volunteer service component, such as acting in the capacity of a club officer. (Maybe this is an incentive for more people to become active in their club’s leadership). Also travel expenses, such as meals or lodging, aren’t deductible unless there was no significant element of personal pleasure, recreation, or vacation in the travel.
This last statement needs a bit of parsing. You can deduct meals and lodging if you are volunteering in an activity that may require it. For example, you’re attending a meeting or activity in a volunteer capacity. If the meeting requires an overnight stay, or you buy lunch on the way, it will be deductible. You can certainly derive pleasure from volunteering; but the focus and purpose of the activity must be volunteer related and it can’t be incidental to another pursuit, such as vacation or recreation.
Wear and tear, insurance, and vehicle maintenance costs cannot be deducted; only the mileage deduction and incidentals are allowed.
Things that can’t be deducted
When it comes to deductions to charitable organizations, the IRS is more specific on what is not allowed than what can be deducted. So there is plenty of latitude in cash and non-cash contributions you can do. But there are certain specific items that are not allowed, including:
- Political Contributions
- Dues, fees, or bills paid to country clubs, lodges or fraternal orders, or similar groups
- Cost of raffle, bingo or lottery tickets
- Value of your time or services
- Gifts to individuals or groups that are run for profit
- Gifts to lobbying groups
- Gifts to civic leagues, social and sports clubs, labor unions, and chambers of commerce
- Value of benefit receive in connection with a contribution
- Cost of tuition (although job related education expenses may be deducted separately)
As with anything tax related, record-keeping is important, and the IRS makes the following recommendations for keeping records of your donations.
With cash donations, regardless of the amount, you must maintain a record of the donation (such as a cancelled check or credit card statement or receipt), or a written record from the charity.
For non-cash donations, you must keep a fair-market value record of the item that you donated. So, if you donate a piece of used equipment, you can deduct what a willing buyer would pay a willing seller for the item. If the deduction is more than $500, you need to complete Form 8283 and a deduction of over $5,000 may require an appraisal. Consult a tax professional if you are planning to donate high value items or automobiles to a charitable organization.
Accurate record keeping of donations, both cash and non-cash will help settle the issue if questions arise by the IRS of your charitable contributions.
What about hobby expenses?
Surely you’ve seen that line on the tax form about hobby income and expenses. Generally, if you partake in a hobby that generates income, you can deduct any expenses arising from that hobby against the income generated. Now in amateur radio, we are forbidden to use the airwaves in a pecuniary manner. But there is are side activities that could generate income, like collecting and selling amateur radio equipment.
But if your hobby is generating income, you need to ask yourself: is this a hobby or a business? If the activity you are engaged in is for ‘sport or recreation’ and not to make a profit, then the hobby expense deduction may be helpful against any income the hobby generated. But if you are operating in a businesslike manner and make a profit on a regular basis, you are better off in tax standpoint to declare yourself a business. Consult with a financial professional if you believe your hobby may have become a business.
In order to deduct your allowable amateur radio expenses, you need to be able to itemize deductions on your Federal tax return. If you are planning to take the standard deduction, then these items won’t help. But keep track of your contributions and volunteer work mileage. Who knows, at the end of the year you might have amassed enough to take you over the standard deduction limitation.
I hope you found these tips helpful. As always please consult a tax professional if you have any question about your particular tax situation. Do you have any tax tips for charitable contributions and donations? Please share them in the comments below.
IRS instructions for Form 1040 Schedule A (2016):
IRS Publication 526: Charitable Contributions:
Tax tips for people who earn income from a hobby:
Five basic tax tips about hobbies: