The Tsunami and Taxes

[question everything]

The Wall Street Journal

The Tsunami and Taxes

By TOM HERMAN
Staff Reporter of THE WALL STREET JOURNAL
January 9, 2005

Readers eager to help victims of the tsunami disaster may be wondering about the tax implications for their donations. Here are a few questions you may have, and the answers from tax specialists:

Q: Is there any way for taxpayers to donate money this month to tsunami-relief efforts and deduct it on their federal income-tax returns for 2004?

A: Yes. In a rare display of speed and bipartisanship, Congress approved legislation allowing donors who itemize to claim a tax deduction for 2004 for money contributed this month to qualified charities for tsunami disaster relief.

That's a significant move, said Sen. Max Baucus of Montana, the ranking Democrat on the Senate Finance Committee. In proposing the idea Tuesday, Sen. Baucus said that without such a change, taxpayers would have to wait until next year's filing season to claim a tax deduction for tsunami-related gifts made after Dec. 31, 2004.

This new legislation provides donors with "an extra incentive to support this great cause" during this month, said Sen. Baucus. It allows donors to "receive their deduction now, rather than having to wait until next year to claim it."

Q: When did Congress make this change?

A: The bill sailed through the House and Senate on Thursday. It happened so fast that we don't have answers yet to all questions likely to arise. Stay tuned.

Q: Since the tsunami disaster, have scam artists been preying on donors?

A: Yes, warns Senate Finance Committee Chairman Chuck Grassley. "As experts predicted, some con artists are trying to turn a profit on this tragedy," the Iowa Republican said. Investigators are looking into "potential scams involving the sale of relief bracelets and unsolicited e-mails asking for money to help find loved ones missing after the tsunami." He urges donors to do some research before donating: "Give your money to the needy, not the greedy."

Q: Can I deduct charitable donations for last year if I claim the standard deduction?

A: No. President Bush has proposed allowing taxpayers who don't itemize to be able to deduct at least some of their donations. But that plan isn't yet law.

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