Cash contributions made to charities providing earthquake relief to Haiti, made before March 1, 2010, may be deducted on your 2009 tax return.
The new law is modeled after legislation that encouraged charitable contributions after the 2004 Indian Ocean tsunami.
The law also allows phone bills to be used as proof for taxpayers who made their donation via a text message under a popular Red Cross giving initiative.
Additional tax incentives to help Haiti are still under consideration. One proposal in Congress would extend an expired provision that allows an enhanced deduction for donations of food inventory.
The new law only applies to cash (as opposed to property) contributions. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.
To get a tax benefit, taxpayers must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible.
In considering whether to take the deduction in 2009 or 2010, taxpayers should be aware that the President has proposed to end the Bush tax cuts with respect to the top two income brackets, raising the top tax rate from 35% to 39.6%. The proposals also included a provision that would limit the tax benefit of itemized deductions to 28% for taxpayers in those brackets. It is not yet clear whether Congress will adopt the President’s proposals.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.