If you housed anyone displaced by Hurricane Katrina, if you were displaced by one of several hurricanes, if your home was in one of several hurricane zones, if you donated money, food, or car driving services for the relief effort or went to school in a hurricane zone, among many other hurricane related events, you need Internal Revenue Service Publication 4492.
A host of federal income tax benefits, designed to help ease the financial burden caused by the most devastating hurricane season on record, have been compiled and published in the new IRS Publication 4492 "Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma".
Not every taxpayer eligible for hurricane related tax relief is eligible for all hurricane related tax relief provisions, but there are numerous tax relief scenarios.
Chances are, you will need a tax professional to decipher the details and to make sure you obtain all the benefits for which you qualify.
Among them are many largely under reported benefits.
- If you housed people displaced by Hurricane Katrina for 60 days or more you can claim an additional exemption of $500 for each person up to a maximum of $2,000. Exemptions reduce your income against which taxes are paid.
- If your 2005 earned income is less than your 2004 earned income you can elect to use your 2004 earned income to figure your earned income tax credit and additional child tax credit for 2005 if your main home was in designated hurricane zones. A tax credit reduces dollar-for-dollar the amount of tax you owe.
- Certain IRA and qualified retirement plans tapped for qualified hurricane-related distributions (withdrawals) of up to $100,000 -- say to rebuild a home or fix damage -- are not subject to the additional 10 percent tax (or the additional 25 percent tax for some distributions from Simple IRAs) otherwise levied against early distributions.
Publication 4492 details a host of qualifiers, beginning with geographic areas affected by three hurricanes. Benefits can vary by location and do not always include an entire federally declared disaster area.
For example, when President Bush declared a Hurricane Katrina disaster area it included the entire states of Alabama, Florida, Louisiana and Mississippi. A disaster area designation is one qualifier for certain tax benefits.
However, IRS also designates as a "Katrina Covered Disaster Area" all parishes in Louisiana, all counties in Mississippi, but only 22 counties in Alabama and 11 counties in Florida. A covered disaster area is another qualifier for benefits.
A third geographic qualifier is the Gulf Opportunity or "GO" Zones, core disaster areas where residents are eligible for Federal Emergency Management Agency assistance.
The Katrina GO Zone includes 12 Alabama counties, 31 Louisiana parishes and 49 Mississippi counties.
IRS has established similar covered disaster areas and GO Zones for Hurricanes Wilma and Rita.
The covered areas and zones alone are enough to warrant bringing in professional tax return preparation help.
As well as those who housed residents displaced by hurricanes, you are generally eligible for tax benefits if your home is in a qualified area, but also if your estate or trust-related tax records are maintained in a qualifying area or if you work at assisting in the relief activities in a qualifying area.
Finally, anyone visiting a county or parish in the Hurricane Katrina or Rita qualifying areas, who was injured or killed (or the estate of someone killed) as a result of the hurricanes, is considered an affected taxpayer who may be eligible for certain tax benefits.
Anyone using hurricane related tax benefits are advised to write the assigned disaster designation, i.e. "Hurricane Katrina" in red ink at the top of any form or document filed with the IRS to assure the return is recognized as such.
Hurricane benefit related assistance is also available from the IRS at 1(866) 562-5227.