Employee Leave Donations for Ukraine are Tax Deductible
As the war on Ukraine continues, the need for relief efforts grows. While the US government designated Ukraine for Temporary Protected Status in March, companies in the US and regular citizens are helping too.
Employers are adopting leave-based donation programs that allow employees to waive their accumulated leave, using the cash value for donations to charitable organizations directly supporting victims of the war in Ukraine.
Recognizing the war as a qualifying disaster, the IRS issued Notice 2022-28 on May 19, 2022, offering guidance and a new tax incentive for employers that make leave-based donations.
If your business is thinking about starting a leave donation program, here are a few things to keep in mind:
How It Works
- Your employees can forgo their vacation, sick, or personal leave in exchange for a cash donation/payment by your business to section 170(c) charitable organizations helping those suffering because of the war in Ukraine. Organizations include those giving aid to citizens and residents of Ukraine; individuals working, traveling, or currently present in Ukraine; or refugees from Ukraine.
- Your business may deduct the leave donation payments as either a charitable contribution or business expense deduction.
- Donated leave should be excluded from employee income. Payments made by your business before January 1, 2023 will not be treated as gross income, wages, or compensation for your employees. You should not include the amount of the leave donation payments in Box 1, 3, or 5 of your employees’ Form W-2 at year-end.
- Employees are ineligible to claim the charitable contribution on their tax returns since the donations aren’t considered income, and their employer is already claiming it.
Managing Your Tax Liability with Aldrich
If you have questions about employer leave-based donation programs or want to explore strategies to increase your tax efficiency, reach out to your Aldrich Advisor. Our tax experts can help you determine whether you qualify and what steps your business should take to maximize its tax savings. We are here to help guide you through any tax implications that may come into effect.
Meet the Author
Carrie Sowders, CPA
Aldrich CPAs + Advisors LLP
Carrie leads our Manufacturing group at Aldrich and specializes in serving large and middle market companies, primarily in the consumer and industrial products sectors. Carrie has exclusively practiced in tax since beginning her career in 1998. Prior to joining Aldrich in 2009, Carrie spent a decade with Deloitte and oversaw the tax function of a... Read more Carrie Sowders, CPA
- Certified Public Accountant
- Manufacturing tax
- Consumer business
- Multinational corporate issues
- Tax accounting and methods