When a catastrophe strikes, like the earthquake in Haiti, tax deductions are not the first thing that comes to mind when you think about helping. It can seem, well, distasteful to think about your wallet.
But there’s another way to look at it: tax savings allow you to give more. If you can afford to give $500, and expect a third of your donation back in tax deductions, give $750.
To encourage donations, Congress and President Obama rushed through a law allowing donations for Haiti relief to be claimed on the 2009 return.
Before making any donation, be sure the organization you choose is a good pick. Charity Navigator rates organizations on factors like the percentage of budget that goes to charitable work rather than administration or fundraising. Charity Navigator also has a list of reputable organizations doing work in Haiti. Many experts recommend giving to organizations that operated in Haiti before the earthquake, as they know the territory.
To be eligible for a 2009 charitable deduction, the donation must be made after Jan. 11 and before March 1, and the donation must go to a qualified charity rather than to a specific individual or family. Among the additional rules:
- The law applies only to cash contributions, not clothing, food or volunteering.
- It applies to contributions made by text message, check, credit or debit card.
- To claim the deduction, you must itemize your return.
- If you prefer, you can claim the deduction on your return for 2010 instead of 2009. That could be useful if your tax bracket will be higher in 2010.
- Generally, contributions must be to organizations based in the U.S. The U.S. Agency for International Development has more information. To determine whether an organization qualifies, go to the IRS Web site and type “search for charities” in the search box.
As with any charitable donation, to claim a deduction you must have records. A phone bill is sufficient for donations made by text message, so long as it shows the name of the organization, date and amount given.
For other types of contributions, keep a receipt from the organization or a bank record such as a canceled check.
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