The United States Government is organizing one of the largest relief efforts in our country's history in an effort and save lives and deliver relief to Haiti's citizens. While government has itself donated millions of dollars and other forms of relief, it is often the private sector, the American citizens and businesses, who really step up in tragic times like these to provide assistance when needed around the world.
As an incentive to encourage Americans to donate for Haiti's relief, President Obama signed into law H.R. 4462 on January 22, 2010 (the Act, P.L. 111-1126). The Act allows United States taxpayers to claim a charitable deduction in tax-year 2009 for donations made through March 1, 2010 for the relief of victims in areas affected by the earthquake in Haiti. Thus, the effect of the provision is to give calendar-year taxpayers who make Haitian earthquake related charitable contributions of cash after January 11, 2010, and before March 1, 2010, the opportunity to accelerate their tax benefits and take a tax deduction in 2009, if so desired.
In general, charitable donations are only tax-deductible in the year in which the contribution is made. Therefore, for taxpayers whose taxable year is a calendar year, charitable donations that are made in January or February often are not realized until the following calendar year when the tax return for such calendar year is filed. However, under the Act, in order to receive an accelerated tax benefit, anyone, whether an individual or a business, who may be contemplating making a charitable donation to help victims of the Haitian earthquake should consider doing so before March 1, 2010. Such donors will be in a position to take a charitable deduction for the donation either in tax year 2009 or 2010 (but not both), depending upon which year the tax savings will be maximized. While it is true that tax savings will be accelerated if taken in 2009, the taxpayer may not want to choose 2009 if a larger benefit may be realized in 2010, depending upon the taxpayer's highest marginal tax bracket for each year.
As we have seen, developments in technology over the past few years have allowed donations to be made electronically by text message automatically charged to a telephone or wireless account. In general, the typical record-keeping requirements imposed on charitable donors obligate them to maintain a record of the contribution a bank record or a written communication from the donee showing the name of the organization, the date of the contribution, and the amount of the contribution. Under the Act, the record-keeping requirement will be satisfied by a telephone bill, if it shows the name of the donee organization, the date of the contribution, and the amount of the contribution, thereby facilitating donations made by text message. For contributions made by other means such as a check, credit card or debit card, the taxpayer should maintain a bank record, cancelled check, credit card statement or form of a receipt from the charity showing the name of the charity and the amount of the donation.
As we all know, the citizens of the United States are among the most generous people on the planet. By providing a tax incentive to those that wish to contribute to the Haiti earthquake victims, the United States is promoting our charitable nature and spurring additional relief to the people of Haiti who have been absolutely devastated by this horrible tragedy.
Donors contemplating a charitable donation to help Haitian earthquake victims must make sure that their donation goes to a qualified charity. Most organizations eligible to receive qualified tax-deductible donations are listed in an on-line database available under "Search for Charities" (http://www.irs.gov/charities/article/0,,id=96136,00.html).
Should you have any questions about this opportunity to support the Haitian people tax-efficiently, please let us know.
Timothy P. Fitzgerald is an Associate Attorney with The Law Offices of Marc J. Lane, a Professional Corporation. Mr. Fitzgerald is a graduate of DePaul University College of Law (J.D. with Tax Certificate) and Marquette University (B.S.). Mr. Fitzgerald is also a Certified Public Accountant. Prior to practicing law, Mr. Fitzgerald worked as a tax and audit associate with a large multi-national accounting firm in Chicago.
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