You Make the Call - Sept. 19, 2024

Question: Neighbors Kim and Helen are eagerly anticipating the upcoming Fall Festival at their community church. Together they have been sewing stuffed pumpkins for the church to sell as a fundraiser at the event. They began by purchasing felt material, all of which is only being used for the festival pumpkins. The duo will receive no renumeration from the church for their efforts at all. In looking at potential charitable deductions for their individual Schedule A's (Form 1040), Itemized Deductions, can Kim and Helen deduct the cost of the felt material being used to create the pumpkins?

Answer: Yes, each neighbor may use the amount they personally spent on the material for a charitable deduction, subject to the 60% AGI limitation. 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 60% 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).