House and Senate Pass Tax Breaks for Hurricane Victims
Hurricane Recovery
Memo to Members: Vol 10, No. 37, September 23, 2005
On September 21, the Senate signed off on the House-passed Katrina Emergency Tax Relief Act of 2005, H.R. 3768. The provision in H.R. 3769 that will be most helpful to low income families allows hurricane victims to use their 2004 income level for their 2005 return to ensure that they do not lose the Earned Income Tax Credit or child tax credit because of a change in their circumstances.
Among other provisions are:
- People can withdraw funds from a retirement plan without penalty.
- People who take in hurricane victims will be allowed to claim a special $500 deduction, up to a maximum of $2,000 in tax deductions, for each dislocated individual housed for more than 60 days in the taxpayer’s home.
- Hurricane survivors will not have to pay taxes on any debts that are forgiven as a result of hurricane. Under current law, any cancelled debt is considered taxable income.
- The first-time homebuyer requirement under the mortgage revenue bond (MRB) program has been waived. Thus, prospective homeowners will not have to be first-time homebuyers to take advantage of MRB homeownership incentives.
- Disaster zone employers who continue to employ their workers will receive a tax credit.
The measure has been sent to President Bush for his signature. To read the legislation as passed, go to http://thomas.loc.gov/cgi-bin/query/z?c109:H.R.3769:.
