Note: See this related more recent post from March 19th, 2008, entitled More Road Home Tax Headaches
Four weeks away from tax day, I'm still confused about what to do with Road Home money on my tax return. In 2005 I claimed a $90,000 casualty loss and didn't have to pay federal taxes that year. My taxes that year without the casualty loss would have been about $5,000. In January of 2007 I received $150,000 from the Road Home. Now as best as I can tell I'm required to claim an extra $90,000 in income this year, which will put me in a higher tax bracket, and cost me about $20,000. I read that I'm supposed to claim this Road Home money as income using Schedule 525.
This is very unfair, but if I've learned anything during and after Katrina, it's that government often isn't concerned with fair. Here's what would be more fair: Let me revise my 2005 taxes and not take the casualty loss. I'll pay the government the $5,000 I saved and add interest. Or go back in time and have Allstate pay to fix my house instead of Road Home, then I wouldn't owe the government any of that money. Or being that I've had to pay my mortgage on top of paying for rent while they fix my house for 2 1/2 years, have the government apologize for their sucky levees and forget the 2005 taxes altogether.
Mary Landrieu has consistently tried to get congress to pass legislation that would make Road Home money tax free. I of course am hopeful she succeeds.
6 comments:
Maybe you can file an amended return for 2005. I once filed an amended return about three years after the fact when I discovered an overlooked item that would have have relieved my tax burden somewhat. I didn't have any problems when I did it, but a CPA could tell you for sure. Given the alternative, it's definitely worth looking into. By the way, if you telephone the IRS about such a question, be sure to record the call. (I'm to the point where I'm ready to record every business call and in-person conversation I have with any "authority" about anything related to work, insurance, fixing my house, etc.)
I've heard from many sources that we're not allowed to file a 2005 amended return for Road Home money, but that we need to file a Schedue 525 and claim $90,000 our 2005 casualty loss. And from the T-P article linked above, it seems even the IRS doesn't know exactly what is going in this case.
there's some kind of IRS question line that I've called in the past that might be of some help. They don't even want you to tell them your SS number or name. They didn't give me advice I liked, but they did explain my situation to me so that I didn't hate the IRS quite as much.
But I know how you feel: I got a 9/11 neighborhood assistance subsidy...and then paid a goodly portion of it back in income taxes. Good luck! Courage!
it is my understanding that Senator Landrieu did in fact secure tax relief for hurricane affected citizens. 2009 budget did get Senate approval and will set aside as much as $1 billion to provide relief for Louisiana residents facing tax liabilities on their Road Home grants.
The $3 trillion budget resolution is only advisory and will require future action by Congress. But the budget's tax provisions, approved 99-1 Thursday, put the Senate on record as favoring tax relief for those Louisiana residents who took deductions for their 2005 hurricane losses and are now facing significant tax liabilities on the Road Home grants to repair and rebuild their homes
For more info on Ken's comment, see this.
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