Thursday, September 15, 2005

Katrina Tax Relief--The House Version

Louisiana Ways and Means Committee members Jim McCrery (R) and William Jefferson (D) are sponsoring the Katrina Emergency Tax Relief Act which is expected to pass the House by a massive margin. Provisions include allowing affected taxpayers to calculate child credit and earned income credit based on 2004 income and to assure that dependency exemptions and child credits are not lost on the basis of temporary relocations. Forgiveness of indebtedness will be exempted from income and a $500 relocation deduction will be available to anyone providing rent-free housing to an evacuee for 60 days or more. Additionally, itemizers will be able to deduct 100% of casualty losses (presumably the 10% and $100 floors will be waived) and make tax-free withdrawals from certain retirement accounts (income from those accounts would be taxed on a three-year spread). Rebuilding provisions include a two-year work opportunity credit for hiring those living in damaged areas of the Gulf Coast, a five-year period to replace property without being taxed on insurance gains (question here: is WHERE one builds going to be an issue?) and qualification for first-time homebuyer mortgage rates through 2007. Charitable provisions include waiving 50% and phase-out of deduction provisions on individual cash donations and waiving the 10% corporate donation provision for donations made to Katrina relief efforts during 2005. Moreover, the charitable mileage rate will be raised to 70% of the business rate (question here: is this temporary or indefinite?). The Senate is considering similar but slightly different legislation; a conference committee will be needed at some point.


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