(but 2009 deduction is not best for everyone)
Individuals and corporations wishing to claim their Haiti relief donations on their 2009 tax returns must make those cash donations by midnight on Sunday, February 28. The deduction may be claimed on the 2009 or 2010 tax return, but not both. For some taxpayers, deferring the deduction until 2010 may be more beneficial.
Eligibility rules
Only monetary contributions made January 12, 2010, through February 28, 2010, are eligible for 2009 deduction. This includes check or credit card donations, but not donations of stocks, bonds or other property.
Additionally, only contributions to qualified domestic charitable organizations — that is, Sec. 501(c)(3) organizations — assisting in Haiti are eligible. Donations to foreign relief organizations aren’t eligible unless they have qualified U.S. affiliations.
The normal substantiation rules generally apply: Contributions must be substantiated by a bank record (such as a canceled check or credit card statement) or written documentation from the charity showing the charity’s name and the amount and date of the donation. The legislation provides one special form of substantiation for Haiti relief contributions only: Donations made through cellular phones via text message can be substantiated by a phone bill, as long as it shows the charity’s name and the amount and date of the donation.
Tax planning considerations
Both individuals and corporations can take advantage of the break, but some higher income taxpayers may be better off deferring the deductions to their 2010 returns. This is because they may be subject to a limitation on itemized deductions in 2009 that has been repealed for 2010. The limit applies to taxpayers with 2009 adjusted gross incomes (AGIs) over $166,800 (exception: $83,400 for married couples filing separately).
Taxpayers who expect to be in higher tax brackets in 2010 also may be better off deferring eligible deductions to 2010, because the deduction will save them tax at a higher rate. For example, if your marginal rate is 28 percent for 2009 but 33 percent for 2010, for every $1,000 of deduction you defer to 2010, you’ll save an additional $50 in taxes (28% x $1,000 = $280, 33% x $1,000 = $330).
Also note that the AGI limits that normally apply to charitable donation deductions also apply here. For example, your 2009 deductions of monetary gifts to public charities can’t exceed 50 percent of your 2009 AGI. So if you’ve already made 2009 donations exceeding 50 percent of your AGI, you won’t be able to deduct otherwise eligible Haiti relief contributions on your 2009 tax return.
What’s right for you?
A donation to Haiti relief efforts can make a huge difference to people in tremendous need, and now it can also make a difference in your 2009 tax bill. For assistance determining whether you should take the charitable deduction for 2009 or 2010, please contact us. We’d be pleased to help you with this and other tax planning matters.
KraftCPAs is a public accounting (CPA) firm headquartered in Nashville, TN that provides tax, accounting, audit and consulting services to businesses in middle Tennessee.
