Opportunity To Maximize 2005 Cash Charitable Contributions

December 12, 2005

You may have heard by now that in response to the hurricane disasters along the Gulf, on September 23, 2005, President Bush signed the Katrina Emergency Tax Relief Act of 2005 which temporarily modifies the rules relating to charitable contributions. The most publicized change was that individuals are allowed a full deduction for qualified contributions unimpeded by the usual 50% contribution base limitation. Specifically, a deduction is allowed for qualified contributions up to 100% of the taxpayer's adjusted gross income ("AGI") and this is not limited to Katrina-directed donations. While this is good news, the better news is that Congress also temporarily eliminated the itemized deduction phaseout for qualified contributions. That is, a qualified contribution will not be treated as an itemized deduction for purposes of the overall limitation on itemized deductions. However, any amount carried over into 2006 or beyond will be subject to the reduction. This presents a unique opportunity for taxpayers not only to give more generously to Katrina relief efforts but also to take the opportunity to accelerate their charitable contributions in general. (A qualified contribution is a cash contribution made between August 28, 2005 and December 31, 2005 to a qualified charitable organization.)

It is not too late to take advantage of the great tax break temporarily offered by Congress. All qualified contributions will be 100% deductible (up to 100% of the taxpayer's AGI). So consider making those charitable contributions before December 31, 2005. Please see your tax advisor at Cohen & Grigsby for additional details.