You may have heard that legislation was recently passed and signed by the President on January 7, 2005 which allows a person to make a donation to the Indian Ocean Tsunami relief effort now and claim the deduction on their 2004 return. To be eligible for deduction in 2004, the donation must be made by January 31, 2005, and made in cash, not property (no stocks, or direct donations of food, clothing, medical supplies, etc.). Payment of cash through most means (check, money order, credit card, etc.) should qualify.
You must also itemize deductions (file Schedule A as opposed to claiming the standard deduction) to obtain a tax benefit from the donation. The donation will only benefit you if your total itemized deductions exceed your standard deduction.
As a reminder, for purposes of documentation, you must obtain a written acknowledgement for any donation of $250 or more, and in this case, be sure the documentation indicates the gift is to be used in the charity's Tsunami relief effort. This is important since many relief organizations may use your funds for other relief efforts which do not qualify for the special retroactive deduction if not designated for the Tsunami. You should also verify the selected charity is one that qualifies to receive tax-deductible donations. The IRS's website at www.irs.gov under "Charities and Nonprofits" is one place to check a charity's status.
The language of the legislation indicates the year of deduction (2004 or 2005) is elective. Therefore, if you are inclined to make a contribution, you may want to consider whether claiming the deduction in 2004 or 2005 yields the most tax benefit, or if the tax benefit might be limited under other tax rules for either or both years.
Please contact us if you have any questions or would like assistance in determining the potential tax benefit of a donation.
"CFO Selections was a great solution for our startup. They were able to provide the skills we needed, gave us great advice, and were always very responsive."
