On December 21 , 2005 , President Bush signed the GULF OPPORTUNITY ZONE ACT OF 2005 which provides tax relief to businesses, families and entrepreneurs in Louisiana, Mississippi, Alabama, Florida and Texas. This legislation can be an important step to help residents rebuild their lives after the devastation of Hurricanes Katrina, Rita and Wilma. While Local, State and Federal government officials continue to do political battle over who is at fault and who is going to pay for rebuilding infrastructure, the resourceful and independent individual can take advantage of these tax incentives and actually receive benefits. This article will highlight features of the Tax Act which will benefit individual homeowners and families.

First, who is qualified for this tax relief? Residents of the core disaster area are qualified. In Louisiana, the core disaster area includes East Baton Rouge, West Baton Rouge, Ascension and Livingston parishes as well as parishes directly hit by the hurricanes.

EXTENDED TAX DEADLINES

In general, as of August 29,2005, if you had a valid 2004 tax extension, the ultimate deadline was extended to February 28, 2006 (Mardi Gras) without additional penalties or interest. Other returns due during the last four months of 2005 were also extended.

CASUALTY LOSSES

If you had hurricane damage that was not covered by insurance, you can deduct the fair market value of the property as a casualty loss on your tax return. This includes flood damage and theft. The normal limitation of 10% of your adjusted gross income is suspended for 2005. This translates into a significant increase in the casualty loss deduction. Remember to include insurance deductibles paid, roof damage, fence damage, landscape, clean up and even refrigerated food loss.

INCREASE IN EDUCATION CREDITS

Education credits have been expanded. Both the Hope credit and Lifetime learning credit have been doubled for 2005 and 2006. Qualified expenses have also been expanded to include books, supplies and equipment. Parents with kids in college, or who have gone back to college themselves could benefit.

DEDUCTIONS FOR HELPING DURING HURRICANE

Contributions to charities after August 27,2005 will not be subject to the 50% of gross income limitation or the phase out of itemized deductions if you live in the hurricane disaster area. Make sure you submit the dates of all contributions to your tax advisor.

Did you drive to a shelter to volunteer or provide transportation for church or relief workers?

Mileage rates for helping charitable organizations with services related to hurricane Katrina were increased to 34 cents/mile.

You may be able to claim an additional exemption of $500 for each person (maximum $2000) you provided housing to for 60 consecutive days. The individual cannot be your spouse or dependent. You will also need their social security number and original address to claim the exemption.

ACCESS YOUR IRAs and RETIREMENT PLANS

If you sustained an economic loss because of one of the hurricanes you can take a distribution of up to $100,000 in 2005 or 2006 from your IRA or 401k plan without a 10% penalty. Moreover, the distribution will be taxed pro rata over the next three years. Even better, if you put the funds back before the end of the three year period, (ie rollover ) you can avoid or recoup all taxes.

WHERE CAN YOU FIND MORE HELP?

As we have painfully learned, help from any level of government can be confusing, frustrating and slow. The effects of these hurricanes are still not fully known. The good news is that there are also financial opportunities for healthy change and growth. Now is the time to seek professional help to determine how you can financially bounce back For more information , consult a CPA or go on the web to IRS.gov. and look at IRS pub 4492.You can also contact Michael at 225-292-7434 or .

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