Congress passed a bill which allows donations to the Haiti Earthquake Relief Effort to be claimed as a tax deduction on 2009 tax returns. The donations must have been made between January 12th and February 28th, 2010. For those that have already filed their 2009 returns, rest assured, you can amend your return to include this tax deduction. Just a little more paper work.

Charitable Donation Rules Still Apply
We know, there are a lot of them which can get confusing, so be sure to review them all.

1) Keep Supporting Documentation
Please remember to KEEP all of the documentation related to your contribution as supporting evidence. This includes a receipt from the charitable organization detailing the name of the organization, the date, the amount of the contribution and description – if it is property. Also keep any bank or credit card statements that also validate the contribution (IRS Publication 526).

2) Sorry Charlie…You Must Itemize to Claim the Deduction
If you want to claim the donation as a tax deduction, you must itemize. You cannot take the standard deduction.

3) Donations Must be Made to a Qualified Organization
We know, you may have a friend that lives in Haiti. Unfortunately, you cannot claim a tax deduction for donating directly to him or her. Generally speaking, you need to make a donation to a qualified organization for tax deductions which include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals (IRS Publication 78).

4) Maximum Tax Deduction for Contribution – 50% of AGI
Generally, you cannot claim this deduction if your TOTAL tax deductions for charitable contributions for the year is over 50% of your adjusted gross income (AGI). If you are over the limit, kudos to you for being so generous!

5) Contributing Property Can Get Complicated
If there is a capital gain associated with the Fair Market Value of the contributed property, you could only contribute up to 30% of your AGI unless you choose to reduce the gain associated with the FMV of the property. In some instances, you may not be able to contribute more than 20% of AGI. These types of scenarios can get complicated so be sure to consult with one of our tax advisors if you are in this situation. Below are two special rules for contributing property in the form of clothing and motor vehicles.

Giving Away Your Wardrobe or Couch?
Any clothing or household items that you donate must be in good used condition or better. If the items are greater than $500, you don’t need to meet this standard as long as there is a qualified appraisal with the item.

Saying Goodbye to the Car, Boat or Plane?
Congrats on being lucky enough to have one of these items. Please note that if the claimed value is greater than $500, you can only deduct the lesser of the gross proceeds from the sale by the organization or the FMV of the property on the date of the contribution. You also would need to attach Copy B of Form 1098-C to your return to claim this deduction. If the claimed value is less than $500 it is the lesser of $500 or the FMV at the date of contribution.

As you can see claiming these contributions can get complicated so please review the IRS Publication 526 or consult with one of our tax experts.

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