Tsunami Relief Donations Eligible For 2004 Deduction

Usually, charitable contributions are only tax deductible in the year they are made. So, an individual taxpayer generally may only deduct for 2004 those contributions that were made on or before December 31, 2004. To encourage donations to help those affected by the recent disaster in the Indian Ocean region, however, our lawmakers have made an exception to this rule.

On January 7, 2005, President Bush signed legislation that allows taxpayers to claim a deduction on their 2004 federal income-tax returns for donations made to organizations involved in relief efforts for victims of the Indian Ocean tsunami.

Individuals and corporations making cash donations through January 31, 2005, will be eligible to claim a deduction on their 2004 returns. Contributions must be specifically designated for tsunami relief to qualify. Individual taxpayers must itemize to take advantage of the deduction.

Taxpayers should review their marginal income-tax brackets for 2004 and 2005 before deciding whether to claim the deduction for 2004. If claiming the deduction in 2005 would provide a greater tax savings, filers would still have that option available to them.

The Internal Revenue Service is expected to issue guidance to help taxpayers seeking to claim the deduction in 2004. Donations must meet the general requirements for charitable contribution deductions under the tax law.

We’d be happy to provide answers to any questions about this new tax provision or your 2004 tax return in general.

The information provided in the newsletter has been obtained from sources believed to be reliable but its accuracy is not guaranteed.