Katrina Brings Larger Charitable Deductions

It's worth noting here that individual donors get extra leeway with respect to the use of those funds by the charities. Unlike corporations–whose contributions must be made for relief efforts related to Hurricane Katrina–cash gifts from individual donors are not so restricted.

Finally, individual taxpayers must make an election to have this treatment apply.

An additional tax break provided under the act is the temporary relaxation of one of the so-called "stealth taxes"–the limitation on itemized deductions. The new law provides that the deduction for qualified cash contributions is not treated as an itemized deduction for purposes of the overall limitation on itemized deductions.

The potential benefit of these two breaks taken together is worth serious consideration. Undoubtedly, many individuals already have donated money to charity in response to the urgent appeals for donations that occurred in the wake of Katrina. But with an opportunity of this scope still in effect, some taxpayers might want to consider giving even more than they already have–and those who hadn't planned to give at all may change their minds.

So, urge your clients to take advantage of this window of opportunity before it's too late!

Sonya E. King, JD, LLM, is an editor of Tax Facts, a publication of The National Underwriter Company. She can be reached via e-mail at [email protected].