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New law gives disaster donors a fast tax break
Charitable giving in the wake of the tsunami in South Asia can be deducted on 2004 returns. But remember that in 2005.
By HELEN HUNTLEY
Published January 8, 2005
Donors to the tsunami relief effort are getting an income tax break from Congress - and there's still time to take advantage of it.
President Bush is expected to sign an unusual bill making January donations to tsunami relief deductible on 2004 returns. Taxpayers who itemize deductions will have the option of treating those donations as though they were made in December.
"The American people are some of the most generous in the world, and this proposal will give them an extra incentive to support this great cause," said Sen. Max Baucus, D-Mont., who sponsored the measure with Finance Committee chairman Charles Grassley, R-Iowa. The bill passed both houses of Congress with a voice vote.
The tax break applies only to cash contributions to qualified U.S. charities helping victims of December's Indian Ocean tsunami, which claimed more than 140,000 lives.
The change in the tax rules is unusual, but it does have something of a precedent in the treatment of casualty losses from natural disasters. Taxpayers who suffered uninsured losses from the Florida hurricanes this summer had the option of getting their tax benefits early by filing amended 2003 returns.
The rules raise the possibility that some taxpayers might take the same deduction in 2004 and 2005 tax years.
"There probably will be some "accidental' double dipping, but I wouldn't recommend it," said Wayne "Skipp" Fraser, an accountant with Cherry, Bekaert & Holland in St. Petersburg. "Our whole system is based on the honor system."
Tax preparers will have an extra question to ask when they see a tsunami relief donation, said Mark Steber, vice president of tax resources for the tax preparation chain Jackson Hewitt. He said this year's question will be "When do you want to deduct it?" and next year's "Have you deducted this before?" He said he expects most people to opt for 2004.
"Everybody likes to accelerate deductions," he said.
Information from Times wires was used in this report. Helen Huntley can be reached at (727) 893-8230.
[Last modified January 19, 2005, 14:59:34]
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