On September 23, 2005, President Bush signed into law the Katrina Emergency Tax Relief Act (KETRA), which includes the following tax breaks to encourage donors to give to hurricane-relief efforts:
* Individuals will be allowed to deduct up to 100 percent of their adjusted gross income for any charitable gifts they make in 2005 (normally capped at 50 percent).
* Corporations will be allowed to deduct up to 100 percent of their taxable income in 2005 so long as the additional giving is in cash and goes to an organization that is providing relief to Hurricane Katrina survivors (normally capped at 10 percent).
* Ranches, farms and other such businesses (including those set up as partnerships and S corporations) will be allowed to write off donations of food to charities.
* Companies that donate educational books to public schools will be allowed to take a charitable deduction for such gifts.
* Volunteers will be able to deduct 34 cents per mile for driving their own cars in their capacity as volunteers for a charity (normally set at 14 cents per mile).
* People who house victime of Hurricane Katrina for at least 60 days will be entitled to claim an additional personal exemption of $500 per person they house, up to a maximum total of $2,000, on their 2005 federal income tax returns.
One key provision originally in the bill but deleted from the final version allowed individuals to give money in their Individual Retirement Accounts (IRAs) to charities tax free.
Click here for an article on KETRA in the San Francisco Chronicle.
Click here for an excellent analysis of KETRA by RIA – "Special Study: Summary of key provisions in the Katrina Emergency Tax Relief Act of 2005."