Key Issue 26H: Deducting Out-of-pocket Expenses.

Although a charitable deduction is not allowed for a contribution of services, unreimbursed out-of-pocket expenditures made in rendering gratuitous services to a charitable organization may be deductible [Reg. 1.170A-1(g)]. The expenses are treated as direct payments to the charity, rather than for the use of the organization (Rev. Rul. 84-61) so they are subject to the 50% of AGI limitation (30% if made to other than a 50% charity). The expenses must be nonpersonal, directly connected with, and solely attributable to the rendering of such services (Rev. Rul. 69-473). Thus, expenditures incurred in a charitable purpose, but that primarily benefit the taxpayer, are not deductible as charitable contributions (Saltzman).

Example 26H-1: Out-of-pocket expenses qualifying as a charitable contribution.

Erica, leader of her daughter's Girl Scout troop, takes the group on a weekend camping trip. Provided she is on duty in a genuine and substantial sense throughout the trip, she can claim her out-of-pocket travel expenses as a charitable contribution even though she enjoys the trip.

If Elaine (her sister) goes on the trip to help out (and has only nominal duties or is not required to render services for significant portions of the trip), her travel expenses are not deductible.
Examples of unreimbursed expenses deductible as charitable contributions include uniforms unsuitable for everyday use, equipment, copying charges, office supplies, long distance charges, postage, transportation, or other travel incurred while rendering services for a qualified organization. Travel expenses incurred while away from home, such as meals and lodging, are deductible only if there is no significant personal pleasure, recreation, or vacation in the travel [IRC Sec. 170(j)] and the services performed are substantial. In Field, deductions were denied for travel expenses incurred as a volunteer to a symphony orchestra on an overseas tour. The court held that the expenditures were primarily personal (i.e., sightseeing). In Van Dusen, out of pocket costs incurred for caring for foster cats as a volunteer for an animal shelter were allowed.

Note: The rule requiring the taxpayer to derive no significant pleasure, recreation, or vacation from charitable travel applies whether the taxpayer directly pays the expenses or makes a contribution to the charity, which in turn pays for the expenses.
The cost of child care while performing services for a charitable organization is not deductible, even if the volunteer work cannot be performed without the expense (Rev. Rul. 73-597).

Generally, the use of an auto for charitable purposes is deductible as a charitable contribution at the rate of $.14 per mile [IRC Sec. 170(i)]. Alternatively, the cost of gas and oil directly related to the use of the auto for volunteer services to a charitable organization are deductible; general expenses such as depreciation, lease payments, license and registration fees, and insurance are not deductible. Parking fees and tolls incurred are deductible whether the standard mileage rate or actual expense method is used (IR-2011-116).