by Richard Schneider
Emeritus Professor of Accounting
Winona State University
On January 22nd, the president signed into law a provision allowing donors to the Haitian relief effort to deduct the contribution on their 2009 tax return. The donation must be made after January 10th and before March 1st, 2010. There are several other rules:
1. The donation must be made to a legitimate charitable organization.
2. The donation must be earmarked for the Haitian earthquake victims.
3. The form of donation could be cash, text message, credit card, debit card, money order, or non-cash item.
4. The recordkeeping requirements of the tax code require the donor to have a receipt showing the date, donee organization, amount of the contribution, and if a non-text message donation, the intent of donation. For a text message donation the telephone bill will be adequate, if it shows the information required above.
5. The taxpayer must itemize deductions to take the donation as a deduction.
6. The taxpayer may take the deduction for the donation on either the 2009 or 2010 tax return, but not both.
7. If the taxpayer makes several donations, each is treated separately, one maybe deducted on the 2009 return and the other on the 2010 return.
You have until the end of February to take advantage of this opportunity to help the victims in Haiti, and get an additional tax deduction on your 2009 return. This is not the first time the federal government allowed donations for a disaster made in one year to be deducted in the prior year. In 2005 president, Bush signed an act to allow donations for victims of the Indian Ocean Tsunami, to be deducted on the 2004 returns.
As always, consult your tax adviser to determine which year of deduction would be best for you. A word a caution, the states may not allow the deduction in 2009, thus creating an additional add back item on the state return.