Archive for December, 2005

As the year draws to a close, the holiday shopping season is in full swing. Finding the perfect gift for family and friends is the task at hand. However, generous donors are reminded that the Dec. 31 deadline for making tax-deductible donations also is around the corner.

The tragic natural disasters that occurred during this past year were devastating for so many families. As is often the case, our fellow citizens rose to the occasion to give time, money and resources to those in need. The images on television went from visions of tragic inhumanity to now illustrating the worldwide efforts to rebuild a better community.

The gifts made for disaster relief have come from the heart. The tax benefits are gravy compared to the gratification received from knowing one has helped improve our global community. However, the government has sweetened the tax benefits for those who want to make a very large contribution to their favorite charity. The opportunity arose from the Katrina Emergency Tax Relief Act, or KETRA, which passed in September.

Current law limits itemized deductions for gifts of cash to 50 percent of your adjusted gross income each year. KETRA increases the deduction amount to 100 percent of your adjusted gross income for any cash gift made between Aug. 28 and Dec. 31. This means it actually is possible to eliminate your income tax by making a cash gift.

The lesser-known fact about KETRA is that qualifying donations are not limited to charities associated with disaster relief. This is important for the nonprofit organizations that do important work but have lost valuable donations as gifts were diverted to disaster relief.

Making a choice about the organization that is worthy of your gift is a very personal choice. I do encourage donors to remember their local charities when making this decision. Their success relies on your contribution.

As always, there are exceptions to the rules. Please consult your tax adviser regarding deductions and qualifying charities.