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IRS Allows Workers To Donate Days Off For Tax Deductions

The IRS is doing everything in its power to help victims of Hurricane Sandy. Going beyond the usual tax relief available to taxpayers in federally designated disaster areas, it has announced a special leave-based program designed to encourage employees to make charitable donations.

Under the new IRS program, employees may donate vacation, sick, or personal leave in exchange for cash payments that their employers will make to qualified tax-exempt organizations on behalf of Hurricane Sandy victims. So instead of taking a week of vacation, say, a worker could direct the cash value of that time off to a charity helping those hurt by the disaster. This program will continue through the end of 2013, with donated leave excluded from employees’ taxable income. Employers can then deduct the cash payments as a charitable donation. This approach is similar to one used for victims of Hurricane Katrina.

Note that taxpayers who suffer property damage in a federally designated disaster area can claim casualty losses on the tax return for the year prior to the year of the event. For instance, Hurricane Sandy victims may obtain fast tax relief by amending their 2011 returns instead of waiting to file their 2012 returns in 2013. However, the usual limits for casualty loss deductions, including a floor of 10% of adjusted gross income and a $100 reduction per event, still apply.


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This article was written by a professional financial journalist for LifePlan Of New York and is not intended as legal or investment advice.

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