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Discussion:Katrina Relief act

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Discussion Forum Index --> Tax Questions --> Katrina Relief act


Dbengio (talk|edits) said:

22 November 2005
I just heard that there is a provision in this Hurricane Relief Act which says that if you spend money in 2005 to repair damage caused by the hurricanes, the amount is fully deductible. I understand this to mean that the 2% of AGI limitation for Casualty losses doesn't apply.

Does anyone have reliable information regarding this matter?

MEJungman (talk|edits) said:

22 November 2005
Here's an excerpt from the page New Tax Law Eases Loss Limitations for Katrina Victims on the IRS web site:
Ordinarily, to figure a deduction for a personal casualty or theft loss, you must reduce the loss by $100 and also reduce the total of your casualty and theft losses by 10 percent of your adjusted gross income. Only the excess over these $100 and 10 percent limits is deductible. The new law removes these limits for Hurricane Katrina losses, so that the entire amount is deductible.
To qualify, a loss must be attributable to Hurricane Katrina and it must have occurred after August 24, 2005, in the Presidentially-declared disaster area. The $100 and 10-percent limits still apply to losses that were not caused by Hurricane Katrina.
Like all casualty and theft losses, Hurricane Katrina losses must be claimed as an itemized deduction. If you take the standard deduction you cannot claim them. You cannot claim a deduction for any part of a loss for which you receive or expect to receive insurance or other reimbursement.

That IRS web page has more detail about Katrina relief. You might also look at the page FAQs About Your (Katrina) Tax Relief. The page Tax Relief in Disaster Situations has general info., including info on Hurricanes Rita and Wilma.

(The 2% AGI limitation is actually for miscellaneous itemized deductions, not casualty losses.)

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