Pro bono service is something that you perform for free without any charges. It is often carried out to benefit a cause or for the greater good of the community. While expenses used for performing pro bono services are tax-deductible, others may not be. Here are the details. Also, check out Beem which offers accurate and reliable online tax filing service with the maximum refund benefits.
Is Pro Bono Work Tax Deductible?
No, pro bono work does not account for tax deductions. According to the IRS (Internal Revenue Services), one does not qualify for a deduction in tax for any valued professional services provided to a qualified organization, government department, or nonprofit firm. However, certain expenses you incur in performing your pro bono work may allow you to enjoy the tax benefit, provided those expenses benefit the organization more than you. Expenses such as travel costs, acquiring certain materials for completion of the pro bono work, etc, may be included for a deduction on tax provided they weren’t reimbursed.
Services and Time vs. Expenses
Your profession holds value with the fees you charge for your services and time. You generally can’t claim a deduction of costs and time for pro bono work. But you can deduct the expenses on your tax returns that the IRS qualifies. For example, you, a legal consultant charging $100 for an hour, cannot deduct $200 for providing two hours of pro bono services. However, expenses incurred while giving your time or assistance can be removed.
Also Read: Are Girl Scout Cookies Tax Deductible
How Do You Write Off Your Pro Bono Expenses on Your Tax Returns?
Pro bono expenses incurred through your business have different forms for itemizing the pro bono expenses allocated by the IRS. If you are a sole proprietor or an LLC filing as a sole proprietor, you write off pro bono expenses on Schedule C of Form 1040. Furthermore, if you are a single S-Corporation member, you can write them off on Form 1120S. Use Form 1065 if you are a part of a partnership firm.
Expenses That Might be Deductible
There are two primary requirements of the IRS for the deduction of pro bono work:
- The expenses must be incurred while performing the service for the qualifying organization.
- The expense must primarily benefit the charitable organization more than the taxpayer.
This means expenses like supplies, travel and external services hired on a project for the organization that directly benefited the charity. It’s the donor’s responsibility to prove the donations if opting for charitable deductions by saving the receipts of the expenses and getting records from charitable organizations.
Expenses You Can’t Deduct
This means the expenses on equipment, machinery, or any worldly product that are purchased, and you’d retain even after the pro bono work is completed. For example, you only qualify to claim on the truck you bought to deliver the needy material to the organizations if you gave the car to the charity.
Conclusion
The IRS typically denies deductions when the individual or business benefits more than a charity. There may be certain expenses that are eligible for deductions and some that are not. It’s always advisable to talk to your accountant before applying for deductions. Never subtract cash value for the services and time you charge as a professional. Check out Beem’s Income Tax Calculator and Refund Estimator for an accurate estimate of your tax situation.
