Help Harvey Victims with Vacation Pay, Tax-Free

The Internal Revenue Service is making it easier for some charitable taxpayers and their employers to donate as the nation rushes relief to areas ravaged by Hurricane Harvey. The IRS just announced it will not tax proceeds from “leave-based donation programs” that will benefit Hurricane Harvey victims.

Some, but not all, employers allow their workers to trade in their vacation, personal leave or sick time for cash payments sent to charities.  Here’s how the programs work.  The employee authorizes the exchange. Then, instead of paying him/her for leave time, the employer sends the cash donation directly to a charity or relief effort.

The IRS now says those charitable gifts for Hurricane Harvey relief will not be included in the employee’s wages. They’re tax-free.  Of course, that also means the employee also can’t claim a charitable deduction for the donation on his/her personal tax return.

Employers offering the leave-based plans also receive some tax advantage. The IRS allows them to deduct those donated dollars as business expenses.

The special tax treatment will continue through this year and calendar year 2018, the agency says.

The IRS has offered similar relief before, not only for hurricanes (Matthew in 2016, Sandy in 2012, Katrina in 2005), but also for other disasters, such as the Ebola medical emergency in West Africa in 2014.

If you’re inclined to help that way, check to see if your employer offers this type of charitable giving.

If you want the legalese about leave-based donation payments related to Hurricane Harvey, see IRS Notice 2017-48. More information about Harvey and related issues from the IRS is available at a special Web page:  https://www.irs.gov/newsroom/help-for-victims-of-hurricane-harvey.

Of course, feel free to check in with us at EricJohn Ltd. for tax advice on “leave-based” and other types of donations.

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