By Linda Orlando
Every year millions of people take advantage of the opportunity to lower their tax liability by donating charitable contributions to qualified organizations. Such organizations can include those operated only for charitable, religious, or educational groups, or those that work to prevent cruelty to animals or children. You can contribute cash or donated goods, but if you receive anything in exchange for your contribution, you can deduct only the amount of your contribution that exceeds the amount of what you receive in return. For non-cash donations, you can claim only the amount that the items would sell for at a flea market or garage sale, and in order to deduct more than $500 of non-cash goods, you must fill out a special tax form describing them. Federal tax guidelines specifically outline all the rules and regulations for claiming deductions for charitable donations.
Ordinarily any donations you itemize must be made prior to December 31 of the calendar year in order to be claimed on that year’s income tax return. However, the Asian tsunami disaster occurred on December 26, only five days short of that deadline. So legislators on Capitol Hill decided that the scope and timing of the disaster warranted an exception in this case, since many contributors to the relief effort did not meet the year-end deadline. They would still be able to deduct their donations, but would have had to wait until filing their 2005 returns next year. Although millions of people made tax-deductible donations before the end of the year in order to meet the deadline, many did not, and donations still continue to pour in even now.
To show appreciation for taxpayer donations, and to encourage further contributions, the House and Senate unanimously passed, and the President signed into law, a measure extending the 2004 deductibility of some contributions made to the tsunami relief effort through January 31 of this year. The new deadline was praised extensively for its generosity toward taxpayers in general, particularly because it was expected to prompt additional contributors to respond with giving patterns similar to those experienced regularly at the end of each calendar year by people hoping to meet the December 31 deadline for charitable donations.
Some specific conditions apply to the special extension. First, only donations earmarked for tsunami relief are included in the temporary deduction change, and only cash contributions are allowed. Montana Sen. Max Baucus, who sponsored the bill, says that the cash-only contribution was a stipulation solicited by requests from relief organization workers in the battered areas. "Immediate cash assistance, which saves money by eliminating shipping costs, allows funds to flow into local economies," says Baucus. According to the federal tax code, "cash" includes donations made by credit card or checks. It just excludes donated goods in this case, in terms of the January 31 extension. Donations of material items such as food, clothing, furniture, etc., can still be made and deducted, but they will be counted as a regular 2005 donation.
One important consideration to remember is that only gifts donated to a U.S. organization are tax-deductible. Some givers have been tempted to donate to an internationally based group so that their gift would be put to use more quickly. While that strategy might be helpful to those stricken by the disaster, it is actually a liability for U.S. contributors since gifts to charities are deductible only if a U.S. organization has complete control over the donated funds. Most major U.S. charities have developed special funds for tsunami relief, so if you made a donation prior to January 31 and specifically earmarked your donation for that cause, it will be covered under this special tax ruling allowing it to be deducted on last year’s return.
Of course, you still have the choice of deciding when to take the deduction, based on your tax liability for last year. If you prefer to claim the gift on next year’s return, you can do that. The special extension is available if you want to claim the donation on last year’s return, but you don’t have to.
More details on charitable contribution tax deductions and possible limitations can be found in IRS Publication 526, Charitable Contributions.
Quake-hit Japan nuclear plant faces fresh threat
Up to 160 may have radiation exposure in Japan ... and tsunami near Sendai airport in northern Japan, March 13, 2011. ...
Every year millions of people take advantage of the opportunity to lower their tax liability by donating charitable contributions to qualified organizations. Such organizations can include those operated only for charitable, religious, or educational groups, or those that work to prevent cruelty to animals or children. You can contribute cash or donated goods, but if you receive anything in exchange for your contribution, you can deduct only the amount of your contribution that exceeds the amount of what you receive in return. For non-cash donations, you can claim only the amount that the items would sell for at a flea market or garage sale, and in order to deduct more than $500 of non-cash goods, you must fill out a special tax form describing them. Federal tax guidelines specifically outline all the rules and regulations for claiming deductions for charitable donations.
Ordinarily any donations you itemize must be made prior to December 31 of the calendar year in order to be claimed on that year’s income tax return. However, the Asian tsunami disaster occurred on December 26, only five days short of that deadline. So legislators on Capitol Hill decided that the scope and timing of the disaster warranted an exception in this case, since many contributors to the relief effort did not meet the year-end deadline. They would still be able to deduct their donations, but would have had to wait until filing their 2005 returns next year. Although millions of people made tax-deductible donations before the end of the year in order to meet the deadline, many did not, and donations still continue to pour in even now.
To show appreciation for taxpayer donations, and to encourage further contributions, the House and Senate unanimously passed, and the President signed into law, a measure extending the 2004 deductibility of some contributions made to the tsunami relief effort through January 31 of this year. The new deadline was praised extensively for its generosity toward taxpayers in general, particularly because it was expected to prompt additional contributors to respond with giving patterns similar to those experienced regularly at the end of each calendar year by people hoping to meet the December 31 deadline for charitable donations.
Some specific conditions apply to the special extension. First, only donations earmarked for tsunami relief are included in the temporary deduction change, and only cash contributions are allowed. Montana Sen. Max Baucus, who sponsored the bill, says that the cash-only contribution was a stipulation solicited by requests from relief organization workers in the battered areas. "Immediate cash assistance, which saves money by eliminating shipping costs, allows funds to flow into local economies," says Baucus. According to the federal tax code, "cash" includes donations made by credit card or checks. It just excludes donated goods in this case, in terms of the January 31 extension. Donations of material items such as food, clothing, furniture, etc., can still be made and deducted, but they will be counted as a regular 2005 donation.
One important consideration to remember is that only gifts donated to a U.S. organization are tax-deductible. Some givers have been tempted to donate to an internationally based group so that their gift would be put to use more quickly. While that strategy might be helpful to those stricken by the disaster, it is actually a liability for U.S. contributors since gifts to charities are deductible only if a U.S. organization has complete control over the donated funds. Most major U.S. charities have developed special funds for tsunami relief, so if you made a donation prior to January 31 and specifically earmarked your donation for that cause, it will be covered under this special tax ruling allowing it to be deducted on last year’s return.
Of course, you still have the choice of deciding when to take the deduction, based on your tax liability for last year. If you prefer to claim the gift on next year’s return, you can do that. The special extension is available if you want to claim the donation on last year’s return, but you don’t have to.
More details on charitable contribution tax deductions and possible limitations can be found in IRS Publication 526, Charitable Contributions.
Quake-hit Japan nuclear plant faces fresh threat
Up to 160 may have radiation exposure in Japan ... and tsunami near Sendai airport in northern Japan, March 13, 2011. ...
