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
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
- 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.