Less than two weeks after Hurricane Harvey caused widespread devastation when it made landfall in parts of Texas and Louisiana, Hurricane Irma roared ashore. Irma was so large – and one of the most intense storms recorded in the Atlantic Ocean – that it made landfall in the U.S. Virgin Islands, the British Virgin Islands, St. Martin, Turks & Caicos Islands, the Bahamas, Cuba, and Florida – twice.
As relief crews scramble to provide aid, charitable organizations worry that those who gave generously in the aftermath of Hurricane Harvey may begin to suffer from “donor fatigue.” That’s a term to describe apathy towards charitable giving following one or more appeals for aid. Donors sometimes feel like they’re just plugging holes in a dam as they are asked to help out in many different efforts. But even after Americans made donations to Harvey relief efforts (JJ Watt’s charitable campaign has broken a fundraising record), there is work to be done – not only in Texas and Louisiana but also in those areas impacted by Irma. Families still need access to food and clean water and a safe place to sleep at night.
As you consider which organizations might make the best use of your gifts, don’t forget to consider the impact that your charitable donations might make on your taxes. The majority of Americans donate even when there’s not a tax deduction available. But as the total of your gifts goes up, the chances that they might be deductible – even when you haven’t been able to take advantage of the deduction in the past – also go up.
The number that most individual taxpayers care about for 2017 is $6,350. That’s the standard deduction for the year. That means that if your itemized deductions are less than that number, you will simply claim the standard deduction – and about 2/3 of all taxpayers do. Your itemized deductions include real estate taxes paid, home mortgage interest, medical and dental expenses, theft and casualty losses, job-related expenses, miscellaneous expenses, and yes, charitable donations. The more that total ticks up, the more likely it is that your charitable donation will result in a tax deduction.
Assuming that you will itemize your deductions, the rules for charitable giving still apply even in extraordinary situations. Here are a few of those rules to keep in mind as you donate to Irma:
1. Only donations to qualified charitable organizations are tax deductible. Qualified charitable organizations are those that are recognized by the Internal Revenue Service (IRS) or are de facto charitable organizations like churches, synagogues, temples, and mosques. If you’re not sure whether an organization is qualified, ask to see the determination letter from the IRS: many will post the letter on their website. You can also search the IRS database online using the Exempt Organizations Select Check tool.
2. Gifts to foreign organizations are not tax deductible. This is where you need to be particularly mindful when responding to Hurricane Irma appeals. Qualifying U.S. organizations include those located in the 50 states, the District of Columbia, and those in any possession of the United States, including Puerto Rico, but charitable organizations outside of the U.S. do not qualify (there are certain Canadian, Israeli, and Mexican exceptions).
There was significant damage from Irma in the Caribbean and rebuilding efforts will be key for folks in that region. But gifts made to assist in those efforts are not deductible for U.S. income tax purposes if they are paid to foreign organizations. You also can’t deduct a contribution you made to any qualifying organization if the contribution is earmarked to go to a foreign organization.
However, certain contributions to a qualified organization for use in a program conducted by a foreign charity may be deductible as long as they aren’t earmarked to go to the foreign charity. And you can give to U.S. charities that provide international aid (like Save The Children, Doctors Without Borders, and Samaritan’s Purse) and still claim a deduction.
To be clear: I’m not telling you to avoid making charitable gifts to foreign organizations. Not in the least. But I am advising that gifts to those organizations are not deductible for federal income tax purposes.
3. Remember that donations to individuals will not qualify for a tax deduction. You cannot deduct contributions to individuals no matter how deserving. This includes handouts to the homeless and collections in your neighborhood for those experiencing tough times (including pooled funds). If the deduction is important to you, consider working with an organization which provides disaster or other relief.
4. You can deduct expenses related to volunteering. You can’t deduct the value of your time but you can deduct out of pocket expenses relating to volunteering so long as they’re not reimbursed to you or considered personal. Expenses which might be deductible include the cost of transportation; parking fees and tolls; other travel expenses; uniforms or other clothing worn as part of your charitable service; and supplies. As with all charitable donations, keep good records.
5. Keep good records. Good records are always important when it comes to charitable giving and especially so when it comes to donations of non-cash items.
(You can find more information about what to watch for – and the best ways to give – in this Hurricane Harvey post. For tips on making your charitable gifts count, click here.)
