Special Tax Breaks for Tsunami Donations
As you probably know, millions of Americans opened their wallets to support relief causes in the wake of the disastrous tsunami in South Asia. As a result, nearly a billion dollars has been directed towards helping the tsunami victims and repairing the damage. You may even know that Congress passed special measures to encourage such generosity, but you're probably a little uncertain of the details. We offer the following tips to help you better understand the new rules.
- Special Exemption For January Tsunami Donations
Congress passed a law that enables donors to claim charitable donations for tsunami relief made during January 2005 on either their 2004 or 2005 tax return. This gives donors the opportunity to assess their personal tax liabilities for both years and take the deduction for the year in which it offers the maximum benefit. Donors even have the ability to claim some of these gifts on their 2004 return and others on their 2005 return. However, a single donation cannot be split or claimed in both years.
- Only Cash Gifts Qualify
Keep in mind this special exemption only applies to gifts made by check, credit card or cash. Property (including stock) donated to charities responding to the tsunami disaster may still qualify for a deduction, but only on the return for the year in which the property was donated.
- Normal Tax Rules Apply For Donations To Other Causes
Donations to other causes can only be deducted on the return for the year in which they were made.
- Must Itemize
You must itemize in order to take a charita ble deduction, whether it be tsunami-related or not. Make sure that if you itemize, your total deductions are greater than the standard deduction. If they're not, stick with the standard deduction. For 2004, the standard deduction for a single filer under 65 is $4,850; for a married couple filing jointly it is $9,700.
More information on maximizing the text benefits of your charitable pursuits is available in the Tips & Resources portion of our site.
