Wednesday, January 27, 2010

Haiti Donations and Tax Deductions

A recent tax law change may affect donations being made related to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return.

Per the IRS here are 10 important facts you should know about this special provision:

1 - A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.

2 - The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.

3 - To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.

4 - In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.

5 - The new law applies only to cash contributions. (Cash Contributions mean non-goods donations, like clothing, food, etc.)

6 - Cash contributions made by text message, check, credit card or debit card may be claimed on your federal tax return.

7 - You must itemize your deductions in order to claim these donations on your tax return.

8 - You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.

9 - Contributions made to foreign organizations generally are not deductible. You can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development (

10 - Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check or a receipt from the charity. Receipts should show the name of the charity, the date and amount of the contribution.

Do I have to file a Tax Return?

"Do I have to file a Tax Return?" I am approached with this question on a frequent basis, whether the question is about a child that started working or for a new business venture that has just started. The answer is almost always the same - "It depends". There are many factors that can effect whether you should file a return or not. A few of the factors for this year include the below items to consider:

- Federal Income Tax Withheld - even if you are below the income requirements to file, you should file to get a refund of Federal and possibly state tax withholding. If you don't file, you can't get a refund and there is a limitation on the time period you can claim a refund. Don't miss that opportunity.

- Making Work Pay Credit - new for 2009 is a credit for earned income which could be as much as $800 for married couple filing a joint return and $400 for other taxpayers (single, head of household, married filing separately).

- Earned Income Tax Credit - If you worked and did not earn a lot of money, you may be eligible for this refundable credit. You need to file to be able to claim this.

- Additional Child Tax Credit - this is a refundable tax credit that may be available to you if you have at least one qualifying child (child under age 17 at the end of 2009) and you did not get the full amount of the Child Tax Credit.

- Refundable American Opportunity Credit - this education tax credit is available for 2009 & 2010. This credit is available for the first 4 years of postsecondary education and provides a maximum credit of $2,500 per student.

- First-Time Homebuyer Credit - Just because you bought a home and qualify for the credit is not enough to receive the possible $8,000 tax credit. You must file a tax return to claim the credit and receive your refund. There are certain requirements to qualify for this credit that will be addressed in another posting.

I generally recommend that you consult with a professional to determine your filing requirements if you are uncertain. You may also check out the IRS website and look for the Free File link.