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Special Charitable Income Tax Deduction Alert!

Direct cash contributions by individuals to public charities, made from August 28, 2005 through December 31, 2005, are eligible for a very special tax benefit: they can be used to offset up to 100 percent of an individual’s gross income, instead of the usual 50 percent.  In addition, such contributions will not be subject to the overall limitation on itemized deductions.
 
This provision, included in the Katrina Emergency Tax Relief Act, is intended to stimulate general charitable giving—but it is very narrowly drafted.   First, only cash gifts are eligible.  Second, the recipient must be a public charity.  Third, the public charity must actually receive the cash in 2005—for example, transfers of cash to a trust where a public charity is a future beneficiary would not qualify.  Fourth, transfers to donor advised funds are specifically excluded.