As part of the Emergency Economic Stabilization Act of 2008, special tax provisions were made for victims of the severe storms that hit the Midwest, including Putnam County.
Putnam County Planner Kim Hyten received a review of this act recently.
"There are some good things in here for people who had damage," said Hyten. "A lot of tax breaks are available to those people."
These tax breaks include a no tax penalty for disaster-related pension withdrawals. If you used funds from a retirement account to cover certain expenses related to disaster recovery, the 10-percent penalty on the withdrawal is waived. These monies have to have been taken out of your account prior to Dec. 31, 2008.
If you used monies from a retirement account for a home purchase and could not replace the funds in the account as a result of the disaster, the tax penalty is suspended.
If you suffered economic loss as a result of the disaster, you may be able to double the limitation on loans from your retirement account.
The 10 percent limit for a casualty loss resulting from the damage, destruction or loss of property from a sudden, unexpected event has been eliminated.
If you housed up to four people dislocated by the disaster for at least 60 days, you can claim up to four additional personal exemptions of $500 per person housed on your income tax return.
If you lost your records, you can use your 2007 income to compute your 2008 eligibility for the earned income credit and child tax credit.
The replacement period has been increased to five years for both homes and businesses as long as the home or business remains in the same county. This applies if your home is damaged or destroyed by a disaster and replaced within four years of it.
There is good news for undergraduate and graduate students who are recipients of the Hope Scholarship Credit or the Lifetime Learners Credit. Your credit has been doubled for the 2008 and 2009 tax years.
For those whose primary residence was damaged, the state is permitted to finance low-interest loans for rebuilding or repairing your home.
"There is also tax relief for business who had damage in the floods as well as individual assistance," said Hyten.
Damaged businesses that employ 200 or fewer individuals who paid employees even though the business was inoperable, qualifies for a 40-percent tax credit for wages paid up to $6,000.
Tax-exempt bond financing was increased by approximately $3 billion in flood-declared counties. These may be issued below market rate loans for homebuyers or used to finance construction of multi-family rental properties. This opportunity expires Jan. 1, 2013. Visit www.ihcda.in.gov for more information on this subject.
The tax credit for construction and rehabilitation of low and moderate-income rental housing was increased by approximately $24 million per year in 2008, 2009 and 2010. Credit is available for developers of affordable housing and is allocated by the Indiana Housing and Community Development Authority.
Businesses that suffered damages can claim an additional 50-percent yearly depreciation of the cost of new real and personal property investments made in the disaster area. These deductions are exempt form the Alternative Minimum Tax.
The amount of expensing property available for qualified expenditures is increased by $100,000. Also increased by $600,000 is the level of investment at which tax benefits phase out.
Businesses can deduct 50 percent of the cost of cleanup and demolition in disaster areas.
The expensing of environmental remediation costs were given extended deduction for the costs of cleaning up a qualified contamination site, if the release of hazardous materials is attributable to the disaster.
Rehabilitation costs increased from 10 to 13 percent on most structures and 20 to 26 percent on historic structures.
For more in-depth information on any of these provisions check with your tax advisor. For more details on special tax provisions visit www.ihcda.in.gov