Deductions & Tax Liability
We have compiled the list of
questions below based on inquiries that we
receive. This information is generic in
nature regarding tax policy questions and is
intended
to serve as tax advice. We also cannot
provide up-to-date information on any
Administration or Congressional proposals
that may affect the information shown herein.
Any questions regarding specific tax
situations or for help in filling out your
tax return should be directed to your
attorney, accountant or other tax
professional, or to the Internal
Revenue Service. The IRS will not
comment, though, on the legislative merits of
current tax law, or on pending Congressional
action that may change the tax code. Finally,
we make every effort to make certain that the
information contained here is accurate, but
due to the fluid nature of the legislative
process, changes in tax laws may occur that
are not reflected here at the time of
publication. To the best of our knowledge,
this information is accurate.
Why can't I deduct
"personal" interest expenses when I purchase
a car, or for the interest on my credit
cards?
There is much talk about
encouraging people to volunteer their time to
help organizations that provide community
services. Shouldn't people who do volunteer
work be provided with a tax deduction to
compensate them for their donation?
The deduction for personal
interest, including interest on charge card
purchase of consumer items, was phased out by
the . Congress believed that the
deduction for personal interest encouraged
people to consume and that such consumption
was at the cost of savings. At the time, the
American savings rate was declining and,
unfortunately, the private savings rates
continues to remain low. To eliminate the
significant disincentive to savings, Congress
repealed the itemized deduction for personal
interest other than mortgage interest.
Legislation by the Congress would be required
to reinstate the deduction for personal
interest expenses.
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Under current law, volunteers are
prohibited from taking a charitable
contribution deduction for the value of the
services they provided to charities. However,
the tax code does support volunteer work for
charitable organizations by allowing
volunteers to take a charitable contribution
deduction for expenses they incur in
connection with their volunteer services, but
the expenses must be ones the charity would
otherwise have to incur, not personal
expenses of the volunteer. For example,
volunteers may deduct the cost of materials
they donate for use in repairs to a church,
supplies they use in leading activities at a
day care center, or uniforms they wear when
serving as nurses' aides. However, volunteers
may not deduct personal expenses such as
meals eaten during a break in a local service
project, transportation to and from a school
where they donate their time, or child care
expenses.
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