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Tuesday, October 11, 2005

50% Limit on Charitable Contributions Temporarily Suspended

Generally, individuals making substantial charitable deductions cannot use the charitable income deduction to eliminate all of their taxable income. A 50% limit applies to qualified contributions to the appropriate taxable entity- the maximum charitable deduction allowed is 50% of the adjusted gross income of the taxpayer (without regard to net operating loss carrybacks). Lower percentage limits may apply based on the type of property contributed and the type of entity that receives the contributions.

As part of the Hurricane Katrina Emergency Tax Relief Act of 2005, this 50% limit is suspended for cash contributions made to publicly supported charities. This will apply only for contributions made through December 31, 2005. Interestingly, there is no requirement that the recipient charity be engaged or involved in hurricane relief efforts.

Some recipients will not qualify:

-Section 509(a)(3) "supporting organizations’
-Donor advised funds
-Private nonoperating foundations


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