Special Tax Break for Major Donors to Charities -- Only Through December 31

by John S. James, AIDS Treatment News

Summary: Attention fundraisers: Major donors might eliminate 2005 income tax through large gifts by December 31.

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"For outright gifts of cash made between August 28, 2005, and December 31, 2005, to charities, individuals may take a federal income tax deduction of up to 100 percent of their adjusted gross income (AGI). On January 1, 2006, the deduction limit will revert back to 50 percent of AGI." [1]

This applies for donations to charities -- but not to donor-advised funds or private foundations. [1]

Comment

Apparently this provision (of the Katrina Emergency Tax Relief Act of 2005) only helps those who can afford to donate more than half of their income to charities (not limited to hurricane relief). It appears to let people with plenty of assets to live on wipe out their income tax entirely for 2005, by giving their whole taxable income to the charities of their choice. Check with your accountant for an authoritative opinion.

Fundraisers and donors should know about this possibility before it expires on December 31. Spread the word.

Reference

1. Harvard University, http://post.harvard.edu/pgo/

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