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Special Rules for Late 2005

Congress passed the Katrina Emergency Tax Relief Act of 2005 which modified the rules for deductible contributions in late 2005. Here are the key items for individuals:

  • Normally deductions to charities are limited to 50% of your AGI. This limitation has been suspended for the last 4 months of 2005.
  • This suspension only applies to cash contributions. (Cash contributions include donations by check or money order, etc.) It does not apply to stock or property.
  • You cannot carry over unused deductions into future years if you elect to exceed the 50% limitation.
  • Deductions above 100% of your AGI have no tax benefit.

Deducting contributions for your taxes is only applicable if you itemize on your tax return. If you take the Standard Deduction (at one time called the "short form") then charitable contributions do not affect your tax.

However, the Senate in Congress has passed a bill that will allow for charitable contributions to reduce your taxable income without itemizing. If this provision is accepted by the House, it could alter some tax planning.

"Tax software is no substitute for tax knowledge."

Any views expressed herein are based on our best information. The content of this web site was written as general information without specific individual information and thus may not apply in all situations. This material was not written, and cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

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Janelle Ogg, EA
Richard Ogg, EA