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Haiti donation may carry extra tax benefit

Congress passes bill that would allow Americans to deduct contributions to Haiti relief efforts from 2009 taxes.

By TheStreet Staff Jan 21, 2010 7:07PM

TheStreetBy Joe Mont, TheStreet

 

Congress passed a bill that would let taxpayers who make charitable contributions for Haitian earthquake relief to deduct those donations from their 2009 taxes.

 

Under current law, taxpayers would have to wait until next year to claim a deduction for Haiti-related contributions. The change is similar to legislation created after a tsunami struck Thailand and Indonesia in 2004.

 

The U.S. House of Representatives unanimously approved the Haiti Assistance Income Tax Incentive Act on Wednesday. The Senate passed it unanimously late Thursday. President Obama is expected to sign the bill by the end of the week.

 

"The U.S. tax code should not stand in the way of humanitarian relief efforts. The people in Haiti need a great deal of assistance and there are many generous Americans who want to help," Republican Sen. George LeMieux of Florida said in a statement. "This will make it easier for more people to contribute to Haiti's relief and recovery efforts in the weeks and months to come."

 

A unique feature of the legislation is that it allows taxpayers to deduct text-message donations if they can provide a record of the transaction from their service provider. The American Red Cross has collected an estimated $25 million from donors who texted "HAITI" to "90999" and agreed to be charged $10.

 

"The substantiation requirements for charitable donations are extremely strict," says George Yaksick Jr., a tax analyst for CCH Group. "[A few years ago] Congress enhanced those substantiation requirements to curb abuse. This is the first time it has been liberalized since then."

 

Additional tax breaks may be in the works to support Haitian relief.

 

"We have heard that there might be some movement to help people adopt Haitian children," Yaksick says. "When a person adopts a child, there is an adoption tax credit [$12,150 in 2009], and that is something that could also come into play."

 

Another piece of potential legislation, spearheaded by Democratic Sens. Charles Schumer and Kirsten Gillibrand of New York, would exempt donations to Haiti relief efforts from existing deduction limits. Currently, individuals can deduct cash contributions worth up to 50% of their adjusted gross income without having to carry the deduction for several years. Corporations are limited to 10% of their adjusted taxable income. The limits were previously lifted for cash donations made following Hurricane Katrina.

 

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