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Tsunami Donations -
Additional 2004 Tax Deduction
January 10, 2005
On January 6 Congress approved
an extension for the period of time in which taxpayers can make charitable
contributions to assist victims of the December 26, 2004 Indian Ocean tsunami
and deduct the contributions on their 2004 tax returns. Taxpayers will be able
to claim a charitable contribution deduction in tax year 2004 for donations made
through January 31, 2005, for the relief of victims in areas affected by
the recent tsunami provided the contribution is in cash and otherwise meets the
general requirements for charitable contribution deductions.
Observation: The
measure's language does not specifically define “cash contribution.” Presumably,
the term includes money contributions, those made by check or money order, and
credit card contributions. Also, it appears that only contributions fully
earmarked for tsunami relief qualify for the election. A contribution
made to a fund that provides both relief for tsunami victims and victims
of other disasters may not qualify.
Recommendation: Anyone
who is contemplating making a tsunami relief contribution should do so before
February 1, 2005. If the taxpayer is an individual who itemizes, they will be in
a position to deduct the contribution in either 2004 or 2005. While tax savings
will be realized sooner if 2004 is chosen, a taxpayer may not want to choose
2004 if more taxes would be saved in 2005, taking into account their highest
marginal tax bracket in each year.
Please contact us if you have
any questions regarding this information.
Material discussed in this
Tax Newsletter is meant to provide general
information and should not be acted on without obtaining professional
advice appropriately tailored to your individual needs.
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