In an effort to encourage contributions to aid the victims of the earthquake in Haiti, President Obama has signed legislation that allows U.S. taxpayers making charitable contributions to Haiti relief programs before March 1, 2010 to claim those donations on their 2009 income tax return. Under current law, taxpayers would have had to wait until 2011 to claim the tax deduction on their 2010 returns. 

Details of the measure, including substantiation guidelines for text message donations, are outlined below:

CONTRIBUTIONS
Generally, contributions to qualified charitable organizations are deductible by individuals for the tax year in which the contribution was made. Individuals who itemize their deductions may deduct qualified contributions made in 2009 to charitable organizations on their 2009 returns filed in 2010.

HAITI CONTRIBUTIONS
This bill makes a special exception to the general rule for monetary donations to help Haiti recover from the January 12 earthquake. Individuals who make a monetary donation to a qualified charitable organization after January 11, 2010 and before March 1, 2010 may claim the contribution as a deduction on their 2009 or 2010 federal income tax returns.

(Taxpayers may not deduct contributions on both their 2009 and 2010 returns).

The contribution must be monetary to qualify for this special treatment. Donations by check or credit card qualify. Contributions of marketable securities or other property, however easily convertible into cash, cannot be accelerated. Also, this bill does not waive the normal percentage limitation and carryover rules for charitable deductions.

SUBSTANTIATION
Contributions to qualified charities assisting Haiti must be substantiated. Generally, a taxpayer must have a bank record or written communication from the qualified charitable organization showing the name of the charity, the date the contribution was made and amount of the contribution.

This bill allows one additional method of substantiation:

Individuals who make monetary contributions through their cellular telephones via text message may substantiate their contributions with their telephone bills. The telephone bill must show the name of the charitable organization, the date of the contribution and the amount of the contribution.

WARNING
Qualifying contributions must be made to a domestic charitable organization that is assisting Haiti. Under the Code, as long as a U.S. charity collects the funds and has full control and discretion over them, their use outside the U.S. is irrelevant for itemized charitable deduction purposes. Contributions to foreign relief organizations without U.S. affiliation are not deductible. Similarly, contributions to benefit specific individuals or families are not deductible. Unfortunately, as in past disasters, con artists reportedly are trying to profit on this tragedy; such "contributions" will not qualify, irrespective of the good intentions of the contributor.

If you have made a contribution and have any questions about how this may pertain to you, please contact your Meisel, Tuteur & Lewis professional today at (973) 228-4600.