Photographer: James Keivom/NY Daily News via Getty Images

Congress Offers One Last Chance to Lower Your Tax Bill

A tragedy creates a last-minute charitable deduction

To help the families of two New York police officers killed in December, Congress just created a special tax break. 

Under a bill passed unanimously last week, taxpayers will have until April 15 to make a tax-deductible charitable contribution to organizations supporting the families of Wenjian Liu and Rafael Ramos, who were shot in their patrol car in Brooklyn, N.Y. If President Obama signs the legislation, these donations could be deductible on either 2014 or 2015 taxes. 

It’s a rare, last-minute chance for taxpayers to lower their tax bill, even though the tax year ended on Dec. 31. The only other move that can retroactively lower an individual’s tax burden is a contribution to an individual retirement account, or IRA. Taxpayers have until April 15 to lower their 2014 income by putting up to $5,500 in a traditional IRA. 

Delaying the deadline for charitable contributions isn’t unprecedented, but it seems to be getting more common. In 2005, Congress allowed taxpayers to deduct donations for the Indian Ocean tsunami on their 2004 taxes. It did the same in 2010 for contributions to Haitian earthquake relief and last year for donations to aid organizations helping after a typhoon hit the Philippines.

Some argue that a later deadline should be the rule, rather than the exception. Allowing taxpayers to deduct charitable contributions made through April 15 would give taxpayers an extra incentive to give, C. Eugene Steuerle of the Urban-Brookings Tax has argued, because they would know exactly how much their donations reduce their tax bill. 

Such a change would move the deadline away from the December holidays and would probably complicate budgets and planning for many nonprofits, at least for a while. It would also add a wrinkle to already Byzantine tax rules, says Susquehanna University accounting professor Richard Davis. He worries that taxpayers may end up deducting the same donations twice, in two different tax years. “I am fully supportive of law enforcement,” Davis says. But, when it comes to the tax year, “Dec. 31 should be the end, and Jan. 1 should be the beginning.” 

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