Income Tax Relief in Times of Disaster (CRS Report for Congress)
| Release Date |
Revised Feb. 17, 2006 |
| Report Number |
RS22249 |
| Report Type |
Report |
| Authors |
Pamela J. Jackson, Government and Finance Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
In response to the devastation caused by Hurricane Katrina, disaster areas have been designated in 64 parishes in Louisiana, 52 counties in Mississippi, six counties in Alabama, and three counties in Florida. Special provisions are available for taxpayers to help recover from the impact of a disaster. Generally, individuals and businesses can claim an income tax deduction for casualty losses. When the casualty losses occur in a presidentially-declared disaster area special tax provisions come into play. For example, taxpayers can shorten the amount of time it takes to receive an income tax refund by filing an amended tax return for the previous tax year to claim losses from the disaster. Another special tax rule allows for the deferral of capital gain from involuntary conversions of assets. Taxpayers in a presidentially-declared disaster area who receive grants from FEMA, state programs, charitable organizations or employers to cover medical, transportation, or temporary housing expenses are able to exclude these grants from taxable income. In response to Hurricane Katrina, Congress has enacted additional tax relief. H.R. 3768, the Katrina Emergency Tax Relief Act of 2005 became P.L. 109-73 on September 23, 2005. The new law expands several provisions to provide tax relief to victims of the hurricane. The law also includes provisions that encourage employment and charitable giving. Most recently, the Internal Revenue Service announced tax relief assistance for taxpayers affected by Hurricane Rita. That relief includes the extension of deadlines for filing returns, paying taxes, and performing other time-sensitive acts.
