Disaster Donations and Tax Deduction Tips from Rodman & Rodman

FOR IMMEDIATE RELEASE
CONTACT: Steven V. Dubin, PR Works, (781) 582-1061, sdubin@prworkzone.com
DATELINE: NEWTON, MASS… Last year, countless individuals and businesses stepped up to the plate and made Hurricane Katrina donations in a tremendous show of support for disaster victims.

The reward for doing a good deed is often the deed itself…Knowing that you have done your part to help those in need. But, individuals and businesses may also reap another kind of reward – through tax benefits.

Rodman & Rodman, P.C., based in Newton, Mass., and providers of accounting, tax and business development services to small and medium sized companies throughout New England, outlines a few tax benefits for those who made disaster relief donations in 2005.

For Individuals:
• Did you make a charitable contribution? Charitable contributions may qualify as itemized deductions to reduce taxable income, so if you file your taxes with itemized deductions, you may obtain a tax benefit from making a donation to disaster relief.
• How much of a charitable contribution can be claimed? The government allows you to take deductions for charitable contributions up to 50 percent of your adjusted gross income. Certain types of charitable contributions are limited to 20 or 30 percent of your adjustable gross income; however if you exceed these limitations the excess carries over to future years. Your potential federal tax savings is relative to your incremental tax rate, which ranges from 10 to 35 percent. If you make a donation during a high income year, you may save more taxes.
• There are special tax benefits for donating appreciated property, such as stocks, other securities, real estate, etc. If you would have recognized long-term capital had you sold the property rather than donating it, then you could receive a deduction for the fair market value of the property as of the date it is donated. For example if you donated stock that you purchased years ago for $400 and it is now worth $1,000, you could take a charitable deduction for $1,000 without paying tax on the $600 increase in the value of the stock.
• Prior to 2005, if you donated a vehicle, you could take a deduction equal to the fair market value of the vehicle. The American Jobs Creation Act of 2004 has changed the rules with respect to vehicles donations after 2004. Current tax law limits deductions for charitable contributions of vehicles to the amount of proceeds received by the charitable organization if the vehicle is sold. However if the charitable organization uses the vehicles for its charitable purpose, the donor may still qualify for a deduction equal to the vehicles fair market value. The donor's tax return must include written acknowledgement from the charitable organization confirming the charitable use the vehicle or proceeds received from its sale.

For businesses:
• Certain corporations may donate inventory and take a tax deduction for the cost of the inventory plus half of the unrealized profit on that inventory, but the total deductions can not exceed twice the inventory's cost, as long as their donation is made specifically in care for infants, the ill or needy, as could be the case of Hurricane Katrina.
• Deductions for donations of business property, other than inventory, are generally limited to the original cost of the property reduced for accumulated depreciation. However there are exceptions to this rule for computer equipment and scientific research property.

Remember, only donations made to qualified charitable organizations are deductible for federal tax purposes. Donations made directly to or designated for specific individuals do not qualify for tax deductions. Charitable organizations must be qualified under Section 501(c)(3) of the internal revenue code. This qualification is commonly disclosed with their literature. These organizations include churches, schools, federal, state and local governments and organizations that operate exclusively for religious, charitable, scientific, literary or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals.

Steve Rodman, CPA, MST and president of Rodman & Rodman, P.C. noted, “Many businesses and individuals across the nation generously donated funds, supplies and equipment last year to help with disaster relief efforts. Getting a tax benefit is an added bonus for the donor.”

To learn more about charitable giving and tax deductions, visit www.rodmancpa.com or contact Rodman & Rodman, P.C. at (617) 965-5959.

Rodman & Rodman, P.C.
Founded in 1961, Rodman & Rodman, P.C. provides accounting, tax and business services to small and medium-sized companies throughout New England. With a focus on strategic planning, Rodman & Rodman goes beyond traditional accounting services and takes a proactive approach when serving clients to increase, preserve and sustain clients’ financial net worth.

From business valuations, taxation, audits, fraud detection and prevention services and succession planning to a variety of accounting IT services including software selection, implementation and training, the team at Rodman & Rodman serves as comprehensive advisors to clients. For individual clients, the company offers personal advisory services such as planning for real estate transactions, obtaining financing, estate planning and retirement planning as well as planning for college education.

Rodman & Rodman Certified Public Accountants are located at 3 Newton Executive Park in Newton, Mass. The firm recently relocated to a larger office within the building (Suite 101) to accommodate business growth and a larger team.

For more information, visit their website at www.rodmancpa.com or contact Jen Reading at (617) 965-5959.