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The
generosity of Americans coming to the assistance of the gulf coast after
Hurricane Katrina has been overwhelming. Not only have people opened up
their wallets and their homes, many have volunteered countless hours of
their time. We know these tax breaks are secondary for most people who are
primarily concerned with helping the victims of this horrific disaster, but
you shouldn’t miss out on them.
Congress
and the IRS have acted to help not only the victims of the gulf coast but
also all those who have donated their time and money. Recently congress has
passed the Katrina Emergency Tax
Relief Act of 2005.
To
promote the donations of cash to the various relief groups, Congress has
temporarily relaxed the deduction rules for charitable donations. Generally
charitable donations made by individual taxpayers are limited to 50 percent
of your adjusted gross income for the year. Any excess contributions can be
carried over for up to five years. This
limitation is removed for cash donations given during August 28, 2005
through December 31, 2005. The provision also exempts those donations from
the application of the phase-out of itemized deductions for high-AGI
taxpayers. The relaxed rules on
the deduction of charitable donations are not limited to those charities
specifically related to Katrina relief, but to all charities.
The
charitable contribution deduction for a corporation is generally limited to
10 percent of its taxable income for the year in which the contribution was
made. Excess amounts may be
carried over for up to five years, subject to the same limitations.
The new law also waives the 10 percent limitation for Hurricane
Katrina cash donations during the period August 28 through December 31,
2005. Unlike the individual
relief, the corporate contributions relief provision applies only to
charitable contributions specifically related to Katrina relief.
If
you have opened up your principal residence to Katrina evacuees, you may
also be eligible for a tax break. Those who have provided rent free shelter
to those displaced by Hurricane Katrina for at least 60 days are eligible to
claim a $ 500 tax deduction for each evacuee for up to four people. There
are however some limitations to this deduction. One limitation in particular
is that the evacuee cannot be a spouse or dependent. Non dependent relatives
qualify.
Many
people have traveled hundreds and possibly thousands of miles to assist in
the relief efforts for the Gulf Coast. Those who have can claim an enhanced
charity mileage reimbursement rate of 29 cents per-mile for the period
August 25 through 31, 2005 and 34 cents per-mile from September 1, 2005
through December 31, 2005. Even those who have worked in their home towns
can take the enhanced charity mileage reimbursement rate for mileage related
to relief efforts.
The
new law lifts all casualty loss restrictions for victims of Hurricane
Katrina. Generally, nonbusiness
casualty losses are deductible only to the extent they exceed: (1) 10
percent of the taxpayer’s adjusted gross income and (2) a $100 floor.
Casualty losses that arise in the Hurricane Katrina disaster area on
or after August 25, 2005, and that are attributable to Hurricane Katrina are
not subject to these restrictions.
These
are only some of the provisions included in the Katrina Emergency Tax Relief
Act of 2005. Contact us for more
information.
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