House Passes Tax Breaks for Katrina Victims

WASHINGTON -- The House approved a $6.1 billion package of tax breaks by a 422-0 vote on Wednesday to help families recover from Hurricane Katrina, sending the bill to the Senate where lawmakers hoped to quickly give their final approval, The Associated Press reported.

The tax breaks passed Wednesday waive penalties for hurricane victims who need cash for expenses and recovery and want to use money stashed in protected retirement accounts like IRAs. The Treasury Department had already ruled the storm qualified as a hardship and permitted early withdrawals of retirement funds.

Also under the bill, families that rely on the child tax credit and the earned income tax credit could protect those benefits throughout job losses, residency changes and family separations caused by Hurricane Katrina. Those disruptions could mean that some would not qualify for the family tax breaks this year, but the bill lets taxpayers use 2004 information to calculate the credits.

Other assistance lets taxpayers recoup more of their unreimbursed and uninsured losses, and waives taxes imposed when debts, such as mortgages, are forgiven.

Two tax credits encourage Gulf Coast businesses hit by the storm to keep going. One offsets wages paid to employees hired in the region over the next two years. Another helps small businesses hurt by the storm who continue paying their employees through the end of the year.

-- NYSSCPA.org News Staff

Posted on 9/21/05