Tuesday, September 20, 2005

Hurricane Katrina Emergency Tax Bills Summarized

Legislation is pending to provide tax relief to victims of Hurricane Katrina, and to extend it to victims of other Presidentially declared disaster areas.

Currently on the books, we already have rules for reporting casualty losses sooner, so you can start getting tax refunds now, when you need the money. I've explained how to that in today's MarketWatch article - After Disaster, a Tax Break.

To get a summary of the legislation pending, let's turn to NAEA - www.naea.org
The National Association of Enrolled Agents, whose members are tax specialists, licensed to represent taxpayers before IRS - and who work with all state and local agencies to help you resolve your tax problems.

Hurricane Katrina Relief
Last Thursday, both houses passed by voice vote similar bipartisan tax relief bills for victimsof Hurricane Katrina. The Senate bill interesting.

While the differences will be worked out in conference, the common elements of the billinclude provisions:
  • allowing deductions for taxpayers who take in hurricane evacuees ($500 per evacuee up to $2,000)
  • exempting from taxation debts cancelled because of the hurricane
  • waiving the 10% penalty for early withdrawal from retirement plans
  • eliminating the 10% floor for casualty losses incurred in the disaster area (including those claimed on amended returns
  • extending the replacement period for non-recognition of gain (for property in the disaster area) of involuntarily converted property)
  • raising the mileage rate for charitable use of automobiles (the two bills differ slightly here, with the House at 70% of the standard mileage rate and the Senate at 60%)
  • allowing use of 2004 earned income to calculate thechild credit and earned income credit for 2005 returns
  • creating a tax credit for employers retaining on their payrolls disaster area employees.

What else should we expect?

Well, in an unofficial transcript of the Senate floor colloquy between Senators Grassley and Baucus yesterday, Senator Baucus said, "This is just a start. We have clearly to do more...In the long term, we're obviously going to bring up a package for long-term assistance, enterprise zone, depreciation acceleration, bonding authority to help rebuild infrastructure..."

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