Katrina Emergency Tax Relief Act of 2005

Provisions and Incentives for Hurricane Relief Donors
Many are helping Katrina victims by giving of their time and money. If you are one of these donors, read below to see what tax relief you could qualify to receive through KETRA.

Special exemptions for individuals who house displaced victims. With this law, taxpayers who provide rent-free/unreimbursed housing to dislocated Katrina victims can claim $500 per qualifying victim staying in their principle residence. The victim must have had a residence in the core disaster area and have evacuated. Or, if their home was outside the disaster area, the home must have been evacuated due to hurricane damage. The housing must be provided for a minimum of 60 days beginning after Aug. 28, 2005.

Please note that the exemption cannot be used for anyone already claimed on the taxpayer's return. Also, this deduction can be claimed in either 2005 or 2006, but not both years.
See an example of this applied to a real tax situation.

Income limits for cash contributions. Individuals who contribute cash to a qualified charitable organization are not subject to the 50 percent of adjusted gross income limitation that applies to other contributions. You must elect to have eligible contributions treated as qualified contributions. These cash distributions do not have to be earmarked specifically for Hurricane Katrina relief.

Also, qualified contributions will not be considered for itemized deduction limitations. The maximum contribution allowed needs to equal the taxpayer's AGI minus other charitable contributions allowed on the tax return. This increased limit applies to contributions made after Aug. 28, 2005, and ending on Dec. 31, 2005. Unused charitable contributions carry over to 2006 and the usual AGI limits apply for 2006 and after. If your fiscal year ends during this period, you must elect which year you want this change to apply.

Standard mileage rate for charitable service. From Aug. 29, 2005, to Dec. 31, 2005, KETRA increases the charitable mileage rate to 70 percent of the standard business mileage rate. Therefore, from Aug. 29, 2005, to Aug. 31, 2005, the qualified charitable mileage rate goes up to 29 cents per mile. And, from Sept. 1, 2005, through Dec.31, 2005, that rate increases to 34 cents per mile.

Please remember to keep written records of this mileage with information including number of miles driven, the dates on which the mileage was incurred, the name of the charitable organization for which the services were provided, the location of the services and the charitable purpose. To receive the increased rate, the mileage must be attributed to Katrina-related relief.

If you qualify for 2005 and 2006 Katrina mileage reimbursements, that money will be excluded from gross income as long as the compensation does not exceed the business mileage rate and business recordkeeping for such expenses is maintained. The more extensive recordkeeping listed above does not apply for the charitable mileage deduction.

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