Hurricane Katrina: Charitable Deduction Opportunities

Under Katrina Emergency Tax Relief Act of 2005 (KETRA) Section 303 and JCX-69-05 (9/22/05), p. 21, taxpayers who used their cars, trucks, vans or other vehicles from Aug. 25, 2005 to Dec. 31, 2006 to assist a charity with Hurricane Katrina relief efforts may be able to deduct some of the cost of operating their vehicles during the time they were offering assistance. Either the actual operating costs can be deducted (see below) or the number of miles driven, multiplied by the following rates:

• From Aug. 25, 2005 to Aug. 31, 2005: 29 per mile.

• From Sept. 1, 2005 to Dec. 31, 2005: 34 per mile.

The 2006 rate is 32; see Rev. Proc. 2005-78.

Whichever method taxpayers use, they may also deduct any parking fees or tolls incurred while offering assistance.

Written records must have been kept to deduct actual expenses. If mileage rates are used, a log of the miles driven, as well as the time, place (or use) and purpose of the mileage, must be kept. In both cases, there must be proof that the expenses/mileage was related to Hurricane Katrina relief efforts.

Note: Actual operating costs do not include general repair and maintenance expenses, depreciation, insurance, registration fees or similar costs. If taxpayers decide to compute the actual cost of operating their vehicles while providing Hurricane Katrina relief assistance, they should not include such costs in their calculations. Other costs, like gasoline, may be included.

Mileage Reimbursements

According to KETRA Section 304, if a public charity reimbursed a taxpayer for the actual cost of using a car, truck, van or other vehicle from Aug. 25, 2005Dec. 31, 2006, to assist with Hurricane Katrina relief efforts, he or she does not have to pay Federal income tax on that reimbursement. The same exclusion applies to taxpayers reimbursed at the standard business mileage rate. However, written records must have been kept that substantiate reimbursed expenses or mileage incurred. Reimbursed expenses cannot be deducted.

Food Contributions

Under KETRA Section 305, taxpayers that own grocery stores or other businesses with food inventory may be able to take an enhanced deduction for some of the value of food donated from Aug. 28, 2005 to Dec. 31, 2005, to help those affected by Hurricane Katrina. Caveat: Special rules limit the deductible amount, as well as the types of food for which a deduction can be claimed.

Book Contributions to Schools

KETRA Section 306 provides that C corporations that donated books to public schools from Aug. 28, 2005 to Dec. 31, 2005 may be able to take an enhanced deduction for some of the books value on their Federal income tax returns. Caveat: Special rules limit eligibility for the deduction and require schools receiving books to certify their usability within the curriculum.

From Martin Nissenbaum, New York, NY