- advertisement -

Tax news you can use


Tax laws keep changing, but don't be the last to know about them. Here's the latest filing scoop.

10 new tax laws you need to know
Page | 1 | 2 | 3 | 4 | 5 |

4. Additional personal exemption
Most Hurricane Katrina evacuees initially went to public shelters, but many soon found themselves welcomed into private homes nationwide. If you made a place in your residence for someone who lost their home in the storm or subsequent flooding, you might be eligible for additional personal exemptions.

"Individuals who put up a displaced person at their residence for at least 60 consecutive days can get an added exemption of $500 per person," says Luscombe. You can claim exemptions for up to four persons, giving you a potential maximum benefit of $2,000.

Luscombe says the hurricane guest doesn't have to be a stranger.

"This can also apply to putting up a relative, as long as it's someone who's not a dependent of the taxpayer," he says. That means you couldn't claim it for your child who was living in New Orleans, while attending school there, and who returned home in the wake of Katrina. But a sister or brother, or aunt or other relative could count toward the exemption, says Luscombe.

This exemption is also available in 2006. However, you cannot claim more than $2,000 total for both years. So if you claim four displaced individuals on your 2005 return and they continue to live with you for several months this year, you cannot take the exemptions again on your 2006 return.

If you are confident you will meet the added exemption requirements in 2006 and they would be more worthwhile on that tax return instead of your 2005 one, you might consider waiting until next year to claim this benefit.

5. Enhanced donation and driving breaks
In response to the outpouring of hurricane-related charitable gifts, several tax-law changes in this area were enacted last year.

In most cases, you can't contribute more than 50 percent of your adjusted gross income in a tax year, meaning if your AGI is $30,000 you can only deduct gifts up to $15,000 on a return. You can carry forward any excess into future tax years.

This doesn't affect most of us, but wealthier donors sometimes run into this donation-deduction limit. These filers also find that their total deductions, charitable and all other categories, are reduced because of their higher incomes.

Katrina tax legislation removes both of these charitable-giving restrictions on gifts made between Aug. 28 and Dec. 31. The best part for donors able to give substantial amounts is that the limits aren't restricted to Katrina-connected donations. They are removed for any gift, regardless of the receiving organization's designated cause. So if you made substantial donations in the latter part of 2005, make sure you take the full deduction.

Another new law substantially increases the charitable mileage deduction, normally 14 cents a mile. If you used your vehicle in connection with Katrina relief services last year, you can deduct qualified miles driven between Aug. 25 and Aug. 31 at 29 cents a mile, and at 34 cents per mile for Katrina-related miles on Sept. 1 through Dec. 31. The higher-than-normal rate continues into 2006 at 32 cents per mile.

In both years, the increased deduction rates apply only to miles driven in connection with Hurricane Katrina relief services. Any other transportation for other charities must be calculated at only 14 cents per mile.

In addition to the charitable mileage changes, there are a couple of other auto-related tax laws that might be of note on your 2005 and 2006 returns.

-- Posted: Jan. 23, 2006
Page | 1 | 2 | 3 | 4 | 5 |

- advertisement -
Mortgage calculator
See your FICO Score Range -- Free
How much money can you save in your 401(k) plan?
Which is better -- a rebate or special dealer financing?
- advertisement -