Time is Money: Why Volunteer Hours for Charities Should Be Tax-Deductible

As I write this article, I’m surrounded by reminders of the Holiday season. A Pumpkin Spice Latte on my desk, “Jingle Bells” playing in the background, and a dreaded reminder that I totally forgot to budget for holiday gifts for my loved ones over the past few months.Of course, the spirit of the holidays means far more than cool gadgets and trendy gifts. It is a timely reminder of what our families and communities mean to us. 

For the last couple of years, I volunteer at a homeless shelter to help prepare meals for those less fortunate. While being an incredibly fun and rewarding experience giving back to my community, I’m always struck by how much older my fellow volunteers are than I am. Or, more specifically, I’m confounded by why so few young people seem to volunteer. Digging a little deeper, I found that there’s a valid reason to be concerned: according to the Bureau of Labor Statistics, those over the age of 55 volunteer twice as many hours as those under the age of 34. And while retirees obviously have more time to volunteer, the percentage of Americans volunteering has dropped precipitously from a high of 28.8% in 2005, to 24.9% in 2017, or a loss of more than 13.1 million volunteers per year.

This is a very big deal for charities: On average, Americans serve 7.9 billion hours annually, which is the equivalent of $184 billion dollars of economic activity.

Changes to the Federal tax code have made a significant impact on charitable donations as well. According to Fidelity Charitable, “The tax reform law capped federal deductions of state, local and property taxes at $10,000, which could disproportionately affect residents of high-tax states such as New York, New Jersey and California. New Yorkers, for example, deducted an average of $21,000 in state and local taxes in 2014.That deduction would help you reach the itemization threshold easily. Capping the state, local and property tax deductions at $10,000 means that you could have more difficulty collecting enough deductions to itemize. And if you no longer reach the threshold to itemize, you won’t be able to deduct your charitable donations.”

And therein lies the problem: As much as I would love to donate $11,000 per year to both support organizations I love and meet my tax itemization threshold for New York, clearly this is why I choose to volunteer my time instead. A recent report revealed that millennials aren’t picky or destroying traditional industries out of spite. It turns out we’re just broke. When it comes to younger people, Dr. Mark Snyder, a professor at the University of Minnesota researching the psychology of volunteerism, says career goals usually outweigh desires to volunteer. “But when you get people who are approaching retirement age, career considerations aren’t so important,” he said. “What you see is a sense of volunteering as an act of citizenship and leaving something for next generations and leaving a legacy behind.”

So why aren’t volunteer hours valued as much as cold, hard cash to charities? Now, some expenses related to volunteering are tax-deductible, like the cost of uniforms, mileage for travel expenses, and other items not reimbursed by the charity. However, there is no monetary deduction for a volunteer’s time and service. For example, let’s say that an individual volunteers three hours of her time in the mail room at a nonprofit organization. Normally, the nonprofit would pay a staff person for this service at a rate of $10 per hour. Great work…but the individual cannot claim a monetary deduction of $30 for this volunteer service.

The reasoning for this rests with compliance. It would be incredibly difficult for charities and the IRS to determine individual hourly rates for different types of services, and of course, the potential for fraud would be heightened. 

But what if there was a more streamlined process to calculate deductions for volunteer hours?Cities, states or the IRS could set standard rates for particular services for deductions. For instance, “standard” volunteer hours, such as serving meals or preparing care packages could be calculated at the minimum wage level for jurisdictions, while “professional” services like graphic design, research analysis and legal work could be set at a multiple of the minimum wage. In New York City, the “standard rate” would be $13 per hour, while the “professional rate” could be $26 or $39 per hour for deductions. Granted, a law office that traditionally charges $200 per hour for services might not see an incentive to volunteer more hours than they already do. But knowing that millennials like me are hampered not by a lack of desire to serve, but by structural barriers that rob us of our time and money, change is necessary.

Imagine a young graphic designer right out of school with little to no experience, searching for an entry-level job and looking to building a portfolio of completed projects. That person would be able to develop their skills while volunteering for a non-profit that otherwise would not have been able to afford to hire them. Having a financial incentive to deduct their time from their taxes would alleviate some of the financial pressure and stress of what would otherwise be lost time. 

A new study of 1,000 millennials and 1,000 non-millennials explored the notion of community and what it means, and found that 64 percent of the younger generation feel disconnected from their community. The biggest culprit? Not having enough time. After money, time is cited as the most important resource for both millennials and non-millennials. For young people looking to hone their professional skills while making an impact on all levels of society, volunteering would bring us closer to our communities while making us more empathetic to the struggles of those less fortunate. In the same survey, millennials reported that they wish they were more connected to their local community compared to non-millennials (69% to 54% respectively). For the younger generation – myself included – it is not an issue of selfishness or disinterest that keep us from serving. 

As I go back to browsing the “we’ll get it delivered by Christmas Day” section of Amazon while “Silent Night” plays in the background, I’m reminded just how tiring the hectic aesthetic of the holidays can be. But, I’m also looking forward to catching up with my fellow volunteers and being reminded about what the spirit of the holidays is all about.