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Tax Tidbit 02/10: Haiti Assistance Income Tax Relief Act

Recently Congress unanimously passed the Haiti Assistance Income Tax Relief Act and President Obama signed the bill into law the next day. This Act allows taxpayers to speed up their deductions for charitable contributions made for Haitian earthquake relief. Here is what you should know about this new legislation:

The new law allows taxpayers to deduct on their 2009 income tax returns charitable contributions made early in 2010 for Haitian earthquake relief. Normally, those contributions would be deductible only on the taxpayer's 2010 income tax return, filed in 2011. The IRS says that taxpayers who choose the 2009 option can get a refund in as little as 10 days if they file early, file electronically, and elect direct deposit.

Only contributions made after January 11th and before March 1st qualify for this treatment. The contribution must be made in cash, by check, credit or debit card, or text message. Donations of property do not qualify. The contribution must be specifically for the relief of victims in areas affected by the January 12th earthquake.

To claim the benefit, taxpayers must itemize their deductions. Those who claim the standard deduction are not eligible. Taxpayers should be sure their contributions go to qualified domestic charities. Contributions to foreign organizations and to individuals generally are not deductible. To verify whether an organization qualifies, visit the IRS website (www.irs.gov) and look under “Search for Charities.” However, some qualified charities may not be listed on this site. The accelerated treatment is optional. Most taxpayers will prefer to deduct the contribution in 2009, to receive the tax benefit as soon as possible. Other taxpayers, because of their anticipated income and deductions for 2010, would benefit from keeping the deduction on the 2010 income tax return.

As always, remember to keep your receipts. For contributions of less than $250, a bank record or written communication from the charity will suffice. It should include the charity's name, along with the date and amount of the contribution. I hope this information is helpful. To discuss in more detail any aspect of your charitable contributions, please contact Andrew D. Ross, CPA of Bedard, Kurowicki & Co., CPA's, PC (908) 782-7900 x 113, adr@bkc-cpa.com, or visit www.bkc-cpa.com.