Dues Tax Deductable?!

[Shark_in_Skirt]

Hi everyone!

I was wondering in the dues my dad pays towards my sorority (should I join one this fall) are tax deductable since sororities are non-profit organizations?

I know its a kind of silly question, but I was just curious!

Thanks!

XOXO,
Annie.

[GammaPhiBabe]

No, sorority dues are not tax deductible. I wish they were!

[Kevin]

Most fraternities are classified as 501c7 non-profit organizations. Under this classification donations are not tax deductable.

If you could sneak under 501c10 -- the only difference being that you are under the "lodge" system (which isn't really defined very well in the tax code) donations would be tax deductable.

I'm not sure if dues are EVER deductable though to any organization.

[aephi alum]

Originally posted by ktsnake
I'm not sure if dues are EVER deductable though to any organization.

My synagogue dues are tax deductible... you "receive only intangible religious benefits" from them. But that's because it's a religious organization.

My husband asked one year if his Masonic dues were tax deductible... the answer was no. GLO dues would probably fall under the same category.

[DeltAlum]

Dues are not tax deductable, but money donated to a foundation (ie The Delt Education Foundation) often are. You should check with your headquarters to be sure.

[Eupolis]

If you put ktsnake's and DeltAlum's answers together, you've pretty much got it, but for a few details..

College fraternities are generally treated under section 501(c)(7) of the Internal Revenue Code; if they qualify under (c)(7), they are individually exempt from income tax, but your dues to them are not tax deductible to you.


The longer story:

DeltAlum refers to a charitable contribution deduction, which is a personal, itemized deduction that you can take if you make a contribution to a foundation under section 170(c)(2), "organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, . . . ." This is one big reason that fraternities and sororities keep their charitable foundations separately incorporated from the national organization. I could get a tax deduction for a contribution to the Phi Kappa Tau Foundation, Inc., but not for one to the Phi Kappa Tau Fraternity. If you donate to a foundation, make sure it qualifies, and then get a receipt.

ktsnake also refers to a 170(c)(4) charitable contribution deduction to lodge system organizations. That won't work either -- the gift has to be kept in a separate account for the same purposes given in (c)(2). So, a gift to a lodge's charity fund will be deductible, but dues to a lodge that are spent on operating expenses are not deductible.

So, to sum up: Dues are not tax deductible.

Even if dues were tax deductible, itemizing deductions doesn't pay off for many students -- the standard deduction is higher than most students' itemized deductions.

Charitable donation deductions are also itemized deductions and are capped depending on your income.

[madmax]

If you do want to deduct your dues simply make your chapter dues check out to the "Alpha Beta" Education Foundation.

[Optimist Prime]

I think 501(c)(3) are the only ones tax deductible. I would check with some one about the lodge system thing. I know that donations that aren't dues aren't deductable from lodges we talked about that in class..

[Eupolis]

Originally posted by madmax
If you do want to deduct your dues simply make your chapter dues check out to the "Alpha Beta" Education Foundation.

-- and just be aware that you'll be committing tax fraud in the process.

[Eupolis]

Originally posted by Optimist Prime
I think 501(c)(3) are the only ones tax deductible. I would check with some one about the lodge system thing. I know that donations that aren't dues aren't deductable from lodges we talked about that in class..

My tax professor would insist on walking through the steps, so I'll do that here, as best I can. You started in section 501, so I'll start there, too.

Section 501 does not determine whether a donation to a corporation or fund is tax deductible. Instead, 501 determines whether the corporation or fund itself is taxed at all. 501(c) is the "List of Exempt Organizations." 501(c) organizations of any kind do not pay federal income tax.

The question whether an individual giving money to an organization can take a deduction on her or his own taxes is different. In this particular case, that question is answered, if at all, in the sections of the tax code that give deductions to individuals. Those are sections 161 through 222. It also pays (or doesn't) to look at sections 261 through 280, which tell you explicitly what kinds of things are not deductible.

I'll start in section 262. Section 262 says that personal, living, and family expenses are not deductible. So, we start with the assumption that dues are not deductible, because they are personal expenses. But because section 262 starts off "Except as otherwise provided in this chapter ...," we need to go look at the sections on deductions to see if there are exceptions.

So we go look in the sections on deductions, and only one stands out: "170: Charitable, etc., contributions and gifts." Housing is not covered by the deduction in section 222 for qualified tuition and related expenses, so 222 doesn't apply at all.

Section 170 is the deduction for charitable donations. It's one of the longer sections of the US internal revenue code, and the reason for its length is to keep people from taking huge deductions against cash income by giving away junk property to charities. That's one principle in 170 that doesn't affect us here. The big principle in 170 that does affect us is this: you can't take a 170 deduction for any gift for which you get something in return. If you do, you can only get the deduction for the value of the gift over and above the value of what you got for it. You get an awful lot for dues.

This is partly why fraternities keep their business operations and their charitable or scholarship funds separate. You can get a deduction for the money given to the charitable fund, but not for money given to the fraternity for its business operations. Regular operations of the fraternity are not considered "charity." The group of things that are "charity" is narrower than the group of things that are "non-profit."

What's more, the transaction has to be substantiated if the value is $250 or more. Just signing a check won't do it; you have to get a receipt. The receipt has to contain the right information (170(f)). I think there's another substantiation rule for gifts above $70 or $100, or something in there, but I can't find it. Anyway, if one says she's given a donation but knows she hasn't, that's tax fraud. If one's organization gives one a fake receipt, both the member and the organization commit tax fraud.

The reason that 501(c)(3) appears to make a difference is that 501(c)(3) and 170(c) use nearly identical language. There are charitable organizations that are not 501(c)(3) groups and that qualify (for example, 501(c)(1) and 509(a)(2) or (3) groups), but being "non-profit" is not enough.

This is hard stuff, so if there's a practicing tax attorney who wants to correct me on this, I'd be happy to hear the details.

Meanwhile, I had better add the usual disclaimer: I am not a licensed attorney, and readers are not entitled to treat this as legal advice. What I've done above is to make an argument based on my understanding of the U.S. Internal Revenue Code, arguing by process of elimination that dues to a fraternity or sorority are not deductible from federal income taxes. Donations to a GLO's separate charitable foundation, for which one receives nothing in return, are deductible, though those deductions are both "capped" under section 170 and "floored" as a miscellaneous itemized deduction under section 67(b).

The bottom line: There is no deduction for fun.