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Hurricane Sandy Disaster Relief: How To Ensure Your Donations Will Be Tax Deductible

Contributors: Ali Hirji, Supervisor, Tax & Business and Marla Esan, Director, Tax & Business

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Hurricane Sandy brought heavy downpours and tumultuous winds to the Northeast, leaving residents in its aftermath without homes, power, heat and water. Thousands of people have been displaced and are in need of basic necessities. As a result of the destruction caused to homes and businesses in coastal areas, there has been an outpouring of support from communities all over the nation. Individuals are stepping forward to provide monetary assistance, while others donate clothing, food, water and other items to the recovery efforts and shelters.

In the upcoming days and weeks, it is likely that you will be approached regarding a monetary or property donation. Consider the following when deciding on a donation:

How can you make sure your dollars are going toward relief efforts? How can you ensure that you will be avoiding scams? Additionally, how do you ensure your donation will be tax deductible?

Regulators caution supporters to watch out for Sandy-related scams that take advantage of the public's generosity. Avoid unsolicited emails on disaster relief and be cautious of individuals representing themselves as victims or officials soliciting donations. When contributing over the internet, be careful to choose legitimate charities. Most charitable relief organizations websites end in ".org" and not ".com". Rather than clicking on a link found within an email or website, search for the charity within an online search engine by typing the organization's name. In addition, when donating, checks should be written in the name of an organization and not an individual.

Only contributions made to qualified charitable organizations are tax-deductible. Qualified organizations are those charitable organizations, other than churches and governments, that have applied to the Internal Revenue Service and were approved for tax exempt status. Websites such as http://www.irs.gov/Charities-&-Non-Profits/Search-for-Charities will allow you to verify if a charity is a qualified organization.

Organizations outside the definition of a qualified organization do not provide donors with charitable contribution deductions and actually may give rise to gift tax implications. Donors must exercise caution when contributing to Hurricane Sandy relief efforts that were organized with charitable intent, but because they are not recognized by the IRS as qualified, donations will not be tax-advantageous.

When claiming a deduction for contributions, individuals have the burden of record-keeping. The IRS requires donors making a single contribution of $250 or more, to be responsible for obtaining a written acknowledgment from the charity. For those contributions below $250, bank records, copy of a cancelled check, or other written communication from the charity, will be sufficient to support the deduction. For non cash donations valued at more than $500, but less than $5,000, no deduction will be allowed unless the donor substantiates the contribution with contemporaneous written acknowledgment. Additional substantiation, such as an appraisal or valuation, would be necessary for non cash contributions in excess of $5,000.

For up to date Hurricane Sandy relief information, please visit Marcum's Hurricane Relief webpage at http://www.marcumllp.com/hurricane.

Please contact your Marcum Tax Advisor for additional guidance on verifying proper exempt status of charitable organizations or other assistance in reaching your philanthropic goals.

 
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