Donating unused vacation time, sick leave and personal time
Great Donation Opportunity
As they have done before in the wake of disasters, including Hurricane Katrina, Superstorm Sandy, COVD-19, and Ukrainian relief, the Internal Revenue Service is allowing special contributions for Maui wildfire relief. It permits employees to donate their unused paid vacation, sick leave, and personal leave time to charities that are providing relief to victims of the Maui wildfire that began August 8, 2023.
It is referred to as leave-based donations and here is how it works: if your employer is participating, you can relinquish any unused and paid vacation time, sick leave and personal leave for cash payments which your employer will donate to relief charitable organizations. The cash payment will not be treated as wages to you and your employer can deduct the amount donated as a as charitable contribution under IRC Sec 162 or a business expense under IRC 170.
However, since the income isn’t taxable to you, you will not be allowed to claim the donation as a charitable deduction on your tax return. Even so, excluding income is often worth more as tax savings than a potential tax deduction, especially if you generally claim the standard deduction or you are subject to AGI-based limitations.
This special relief applies to all donations made before January 1, 2025, giving individuals over a year to forgo their unused paid vacation, sick and leave time and have the cash value donated to help those who lost everything including their homes, livelihood and even family in this devastating disaster.
This is a great opportunity to provide sorely needed help in the aftermath of the wildfire without costing you anything but time. Contact your employer to see if they are participating, and if not, make them aware of the unique opportunity. They benefit by not having to pay payroll taxes on the cash equivalent of the donated time, so it is worth their time to participate.
If your employer is unaware of his program refer them to IRS Notice 2023-69 for further details. If you are an employee or employer and have questions related to donating leave time for Maui relief efforts or other charitable contributions, please contact this office.
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