Tax Relief for Katrina Evacuees

October 5, 2005

For Hurricane Katrina evacuees now living in other states, there may be tax relief on the horizon, federal and state recovery officials said this week.

Because of a special Katrina relief bill enacted by Congress and signed into law on Sept. 23, Katrina-impacted taxpayers in disaster-declared counties no longer have to deduct 10 percent of their adjusted gross income and a $100 deductible to claim disaster losses on their federal taxes.

Under the legislation, Katrina victims who can itemize deductions will be able to claim their entire disaster loss, minus any insurance payments or other reimbursements. Some tax filers may find that hurricane losses enable them to itemize deductions when they might not have otherwise qualified to do so.

The new law also:

* Allows Katrina victims to withdraw up to $100,000 without tax penalties from certain retirement accounts, such as 401(k) plans and Individual Retirement Accounts, to pay for disaster-related needs.
* Suspends limits on individual cash contributions made to qualified charities beginning August 28, 2005 through Dec. 31, 2005.
* Provides a tax benefit for people who volunteer to take in Katrina victims, a $500 deduction for each person they house for at least six months, up to a cap of $2,000.

“We want everyone who suffered a loss to get the maximum benefits available. Having your taxes reduced is one of those benefits,” said Paul Fay, FEMA’s federal coordinating officer at the Atlanta Joint Field Office.

“The U.S. Internal Revenue Service (IRS) allows people in federally-declared counties with casualty losses from the disaster to claim this year’s losses on last year’s tax return, or to amend last year’s return if it’s already been filed,” said Dan Boone, media specialist for the IRS. “This can give you a quicker refund than filing the loss with your 2005 tax return. However, waiting to claim the loss on this year’s return might result in a greater tax saving, depending on other income factors.”

To see how the law applies to their individual situation, evacuees should see a tax consultant or talk with the IRS for specifics. More information is available online at and at the Congressional Joint Committee on Taxation Web site,

People who have registered for disaster assistance by calling toll-free 1-800-621-3362 or (TTY) 1-800-462-7585 can talk with an IRS representative at any of the disaster recovery centers set up in Georgia, Tennessee, North Carolina, South Carolina and Kentucky to help Katrina victims.

The IRS also has established a toll-free hotline for hurricane victims at 1-866-562-5227 which operates from 7 a.m. to 10 p.m. Monday through Friday. There, callers can find out about available tax relief, get free copies of their tax return transcripts and receive disaster tax loss kits. To calculate a federal casualty loss deduction, go to the IRS Web site at or read IRS Publication 547, “Casualties, Disasters and Thefts.”

For state income tax waivers or other benefits for Katrina victims, evacuees should check with the state tax office where they formerly resided. Property tax reductions may also be available in certain jurisdictions. For that information, evacuees are urged to consult the tax office in the county or parish where their property is located.

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