Tax relief for Haiti donations
On Jan. 20 the U.S. Senate unanimously passed a bipartisan bill that allows taxpayers to deduct donations to the Haiti earthquake relief from their 2009 tax season instead of 2010’s. The tax relief works on cash donations made after Jan. 11, 2010, but before March 1, 2010.
In 2005 Congress passed a similar bill for donations made to charities involved with the Indian Ocean Tsunami that took place in December 2004. Generally, donations to foreign organizations are not deductible, except in special circumstances made clear by the government.
The House also released an official statement, expressing the deepest condolences and sympathy for the horrific loss of life and the damage caused by the earthquake in Haiti.
“Americans have opened their hearts to help those affected by the Haiti earthquake,” said IRS Commissioner Doug Shulman.” This new law provides an immediate tax benefit for the many taxpayers who have made generous donations.”
On the KU campus, 50 students were polled and 8 of those students knew about the tax relief effort being made by the government – citing online news sources for their knowledge. Although this seems “bad,” the chances of this tax relief helping any of these students is minimal.
Only taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision. Only one-third of taxpayers used itemize deductions, and those are people who have medical bills, mortgages, investment interests, have casualty and theft losses, and maintain solid records to substantiate the itemized deductions.
There is a possible and immediate downside to the bill. Donations to Haiti could reduce donations to other causes and charities, and many of these charities have stressed concerns about Haiti derailing the expected income. They are already facing lower cash flow because of the economy and recession.
Charities that are stateside and international causes are being completed overshadowed by the earthquake. In the first weeks of 2010, more than 60,000 Somalis were displaced. Walter Kaelin, a UN official in Somalia, said, “The existing humanitarian aid is pitifully insufficient,” in an interview for News From Africa, a nonprofit humanitarian online publication.
If a student or a parent is planning on making a donation to Haiti or any other charitable organizations, it should be made clear where the money is going. Eligible organizations can be found in the IRS.gov online database under Search for Charities. Other organizations (churches, governments) can still be eligible if not found on the list.
Make sure to keep bank records of the donation, such as canceled checks or receipts. If the donation is made through text message, which has been popular with college students, keep a copy of your phone bill and make sure it has the name of the organization on it.
Dr. Wagaman, associate professor of Accounting and Finance, warns, “If you are going to donate, you need to make sure you are donating to a recognized charity; there is always a possibility of scammers at a time like this.”
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