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Katrina Act encourages charitable giving

People who wish to make charitable donations have a temporary incentive that raises the percentage limit on individual contributions.

The Hurricane Katrina Tax Relief Act of 2005 contains provisions to encourage charitable giving.  Charitable donations qualifying under this Act can be made to any charity including the Illinois State University Foundation.

The key elements of the Katrina Act include the following provisions:

  • For qualified contributions made in cash from Aug. 28 through Dec. 31, an individual taxpayer may deduct up to 100 percent of AGI opposed to the typical 50 percent deduction.
  • Qualified gifts are defined as gifts of cash that are completed during the period beginning on Aug. 28 and ending on Dec. 31, 2005.
  • These outright gifts of cash also are exempt from the 3 percent reduction in itemized deductions for individuals with an adjusted gross income over $145,950.

In addition, the Katrina Act allows cash withdrawals from IRAs, 403(b)s, 401(k)s to be used as charitable gifts.  Upon withdrawal, the assets will increase the donor(s) adjusted gross income, but the same amount will be reduced as an itemized deduction resulting in a wash.  Also, if an individual is younger than 59.5, there is a ten percent penalty for early withdrawal.  It is important to note that in order to qualify under the terms of the Katrina Act, the withdrawals must be made as charitable gifts prior to Dec. 31.

For more information regarding the Katrina Act or charitable gifts in support of Illinois State University, additional information and links to informative resources can be found on the Illinois State University Foundation’s Web site.

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