Help With Help
Ernie Neve, CPA
September 13, 2017
I am absolutely thrilled to see many people, businesses, and organizations helping out hurricane victims in Texas and Florida. I am doing as much as I can to help as well.
Ordinarily we use this space for lighthearted stories that poke fun at the tax system and some of the clever ways that people endeavor to make it work for them, successfully or not. But the recent stories coming out of Harvey-ravaged Texas and Irma-ravaged Florida suggest a more serious tone for a change. Today we're going to walk through some tax-related opportunities when it comes to reaching out to storm victims. You might be surprised to see how our friends at the IRS are jumping in to help, too:
1) If you want to deduct your contributions, make sure you're giving to a properly registered 501(c)(3) nonprofit. There are more than 1.5 million of them, and many are making extra efforts to help storm victims. These include local groups in affected areas, faith-based groups, and even animal-welfare groups dedicated to rescuing pets displaced by the storms. Many national groups have established special funds for Hurricanes Harvey and Irma, which let you earmark your contributions.
2) Be careful before you join crowdfunding efforts on sites like GoFundMe. While you can certainly find links to registered 501(c)(3) organizations, most individual campaigns won't qualify for tax deductions.
3) Don't be afraid to do some homework on a charity before you give. Check out rating sites like Charity Navigator and Charity Watch, which can tell you how much of your donation your chosen group gobbles up in administrative expenses, and whether they submit their financials to an independent accountant for audit.
4) There's no deduction for the value of time you volunteer for cleanup efforts and other relief. However, you can deduct any expenses you pay, such as for travel to an affected area. You can deduct 14 cents/mile driven in service of a charitable organization.
5) If you don't itemize deductions, consider asking your employer to donate the cash value of your unused vacation time, personal days, or sick leave to charitable organizations. Your tax break will take the form of not recognizing that income in the first place. (Your employer gets the same deduction they would have taken if they had paid it out in compensation.) IRS Notice 2017-48 sets out the rules for you and your employer.
6) The IRS has a web page discussing help for victims of Hurricane Harvey, and we can assume it won't be long before they update it for Irma (and possibly Jose, which at this writing could still hit somewhere on the east coast.) You'll find extended due dates for business returns, penalty waivers, and special provisions letting retirement plans expedite loans and hardship distributions to hurricane victims and their families.
We realize that saving a few bucks on taxes may be the last thing on your mind when you see the devastation Mother Nature has wrought. But those tax breaks serve a purpose, to encourage giving and to help you give more. So don't overlook these opportunities to save. And call us with your questions — coming together as communities is how Americans support each other in times of need, like now.