Extension Tax Deduction for Tsunami Donations

Unanimously passed by Congress on January 6th, and signed by President Bush on January 7th, the new law permits accelerated tax deductions for charitable cash donations made to assist victims of the recent tsunami. 

Specifically, the law allows taxpayers to claim a tax deduction in tax year 2004 for donations made for tsunami disaster relief until January 31, 2005. Under the previous law in effect before the extension was signed, taxpayers had to wait until they filed their 2005 tax returns to claim deductions for tsunami-related gifts made after December 31, 2004. The extension is limited to cash gifts made specifically for disaster relief.

The measure was approved in the House by unanimous consent and was sponsored by House Ways and Means Committee Chairman William M. Thomas, R- Calif., and co-sponsored by ranking member Charles B. Rangel, D-N.Y. The Senate deemed it passed following House approval. Senate Finance Committee Chairman Charles E. Grassley, R-Iowa, and ranking member Max Baucus, D-Mont., sponsored the bill in the Senate. Sens. John McCain, R-Ariz. and Hillary Rodham Clinton, D-N.Y., were co-sponsors.

"Americans are giving generously to tsunami relief, as they did after Sept. 11," said Grassley in a prepared statement. "I hope this extension will encourage them to give even more." Baucus noted that the proposal allows U.S. companies and individuals to claim their deduction for 2004, rather than having to wait until next year to claim it.

Many relief organizations have asked for donations of cash, which save money by eliminating shipping costs to transport goods from the U.S. and allows cash to flow into local economies stimulating grow.

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