Accounting for Pro Bono Expenses and Discounted Legal Services

Over the course of an attorney’s career, there’s a 75% chance that they’ll offer some form of pro bono legal services. You may or may not fall into this category, but if you do, you’ll know that there are still some expenses you incur.

Traveling costs, filing fees and paying an expert witness are just some of the pro bono expenses that you’ll come across.

Can you deduct them?

It depends on the expense. We’ll cover the most common expenses to document and which costs you cannot deduct.

Sorry, You Can’t Deduct the Value of Your Services

You value your services. People pay for them, and when you’re giving them away for “free,” it’s not uncommon to want to deduct these costs. But you cannot deduct:

• The value of your time
• The value of the labor you spent on providing pro bono services

If you had to buy a copy machine for the services or use your own property, you cannot deduct the expenses. For example, let’s assume that you have two homes: one in LA and one in San Diego.

You normally rent the San Diego home on Airbnb, but for the work you’re doing pro bono, you decide to use the home for the duration of the case. You cannot deduct the lost rental value of the house.

Now, for the copying machine, let’s assume that it broke and needed a repair. While you couldn’t deduct the initial purchase of it, you can deduct this repair expense and regular maintenance costs.

You also can’t deduct these pro bono expenses:

• Cost of research services, such as Westlaw
• Certain mileage travel, depending on the state
• Expert witnesses where you have not received prior court approval

State laws do vary, which is why working with an accountant can help you better understand what expenses you can and cannot deduct for pro bono work.

You Can Deduct These Pro Bono Expenses

Here’s where it gets confusing. You may not be able to deduct certain mileage or ask for reimbursement from The Court, such as in-town travel to the courthouse or a restaurant. But again, this varies by state. Other travel expenses may be deductible.

Note: If the expenses were reimbursed, you cannot claim a deduction on them.

Travel Expenses

The Court will often provide reimbursement for travel costs at the government rate, which is $0.70 a mile for business use and $0.14 a mile for charity use. If you take the longest route, excess mileage is unlikely to be reimbursable because it’s often calculated on the most direct route.

Lodging costs are often reimbursable, up to a certain per diem allowance.

If you rent out a penthouse for a night and try to deduct or seek reimbursement for the costs, you’ll likely be denied because the expense may be seen as a significant element of personal pleasure.

If you’re not seeking reimbursement and are seeking deductions, you can generally deduct all travel costs, such as those relating to:

• Taxis
• Trains
• Travel to and from the airport

Office Expenses

If you have to purchase office supplies for your pro bono work, these will still be deductible as long as they’re unreimbursed.

Filing Fees

You’ll pay filing fees out of pocket, and you can deduct them.

Expert Witnesses

You may be able to deduct any expert witness fees if they’re not reimbursable. If they are reimbursable, you’ll often need court approval first.

Postage

While postage costs may seem minimal at first, they can quickly add up. Keep all of your receipts for these costs because you can often deduct them.

Advertising

Expenses paid for promoting your pro bono work may also be deductible. 

Detailed Records Help You Maximize Deductions

Every legal professional wants to maximize deductions, and it’s something we recommend that they do. Your first step in reaching this goal is to have detailed records of everything. Proper bookkeeping is the first step, and the next ones are:

• Keep all of your receipts. With digital scanning, you can easily snap a photo of a receipt and have it added to your online accounting solution.
• Maintain detailed mileage logs for all travel expenses.
• Keep proof that the work was performed for a nonprofit.

Working with an accounting professional is the best way to make sure that your charitable work has the biggest impact. You’re offering free services, but that doesn’t mean that you need to shoulder all of the costs without any tax benefit.

We can even help you put the right technology in place to track your expenses effortlessly.Schedule a consultation with us to learn more about pro bono expenses you can and cannot deduct.