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