Many taxpayers wait until the end of the year to make charitable donations. Recently passed legislation now permits larger than normal charitable deductions but only for a limited period of time. Individual taxpayers may be well-advised to plan now rather than waiting until later.
Under the Katrina Emergency Tax Relief Act of 2005, taxpayers can deduct cash contributions without regard to the ordinarily applicable 50% of adjusted gross income limit. More specifically, the deduction is allowed up to the amount by which the taxpayer’s adjusted gross income exceeds the deduction for other charitable contributions (excess contributions can be carried forward).
Here are the ground rules: First, the tax break applies only to individuals who itemize their deductions.
Second, contributions must be paid during the period beginning Aug. 28, 2005, and ending Dec. 31, 2005. Considering that three-quarters of this year already has passed, that really doesn’t leave you and your clients very much time to waste.
Third, donations must be made in cash or by check, so contributions of appreciated property aren’t eligible.
Fourth, contributions must be made to qualified charities other than supporting organizations.