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Kind Encourages Flood Victims to Take Advantage of New Tax Benefits

January 30, 2009
Press Release

WASHINGTON, DC – U.S. Rep. Ron Kind (D-WI) today encouraged victims of last June’s floods to take advantage of new tax provisions he advanced to help families and businesses rebuild.

“The floods of last summer devastated homes and businesses across Wisconsin,” Rep. Kind said. “Now, as families and businesses alike struggle with the economic downturn, I encourage those who sustained losses from the floods to look into taking advantage of these new tax provisions put in place to help them.”

Rep. Kind is a member of the tax-writing House Ways and Means Committee, and following the floods last summer he introduced legislation to establish a new disaster tax program that would help not only those affected by the Midwest flooding, but anyone devastated by any natural disaster, be it a flood, tornado, or hurricane. In September 2008, Rep. Kind’s provisions were enacted as part of a larger bill that included even more help for families and businesses affected by the Midwest flooding.

In Wisconsin, the new provisions will help those affected by flooding between May 20, 2008, and July 31, 2008. Individuals, businesses, and local governments residing in the following counties may be eligible: Adams, Calumet, Crawford, Columbia, Dane, Dodge, Fond du Lac, Grant, Green Lake, Iowa, Jefferson, Juneau, Kenosha, La Crosse, Lafayette, Marquette, Manitowoc, Milwaukee, Monroe, Ozaukee, Racine, Rock, Richland, Sauk, Sheboygan, Vernon, Walworth, Washington, Waukesha and Winnebago Counties.

For more information on additional provisions for flood victims and to find out if you are eligible, go to www.irs.gov for the Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas.

Some of the provisions available include:

Removal of Loss Limitations
The newly enacted provisions allow people who suffered losses of personal property as a result of the floods to deduct the entire amount of unreimbursed losses. Ordinarily a victim could only deduct losses less $100 and 10% of their adjusted gross income. This is applicable to taxpayers that itemize their deductions.

Cancellation of Debt
Individuals whose main home was located in the disaster area will not have to include in income any non-business debt (such as a mortgage) that is cancelled after the disaster date but before Jan. 1, 2010. Usually, the cancellation of debt is treated as income by the person for whom the debt is forgiven.

Earned Income Tax Credit and Refundable Child Tax Credit
Eligible individuals can choose to calculate their earned income tax credit (EITC) or refundable child tax credit using their prior year’s earned income. Eligible individuals earned income in 2008 is less than their earned income in 2007 and who was displaced from their main home because of the disaster. Taxpayers eligible to make the choice should figure their EITC and refundable child tax credit using their earned income for each year before making the choice to see which gives them the higher credits.

Education Credits
The recently enacted provision doubles the Hope and Lifetime Learning educational credits from $1,800 to $3,600 for each eligible student going to school at eligible institutions in the counties listed above. It also expands the Lifetime Learning Credit from 20 percent to 40 percent.

Exemption for Taxpayers Housing Individuals Displaced by the Midwestern Disasters
Taxpayers who provided housing in their main homes to individuals displaced by the severe storms, tornadoes, or flooding that occurred in the Midwestern Disaster Areas may be able to claim an additional exemption amount of $500 for each such displaced individual.

Increase in the Standard Mileage Rate for Charitable Use of Vehicles
The recently enacted legislation provides special standard mileage rates for taxpayers who used their vehicles to provide charitable services related solely to the flooding. The special rate is 36 cents per mile for the period May 2, 2008, through June 30, 2008. For the period July 1, 2008, through Dec. 31, 2008, the special rate is 41 cents per mile. Taxpayers may also exclude from income any amounts received as mileage reimbursement for the use of a private passenger automobile for the benefit of a qualified charitable organization in responding to the flooding.