Housing Exemptions

One of the most devastating after effects of Hurricane Katrina was the loss of homes. In the storm's aftermath, many people were left living in make-shift shelters that were not equipped for thousands of people at one time. Many people around the country opened their homes to these displaced victims. Some took in family members, some took in friends or acquaintances, and some took in strangers.

To help offset the cost of housing, one of the provisions of KETRA (Katrina Emergency Tax Relief Act of 2005) is an additional personal exemption of $500 for each displaced individual housed by a taxpayer. The definition of a displaced individual is one who meets the following criteria:

  • Their principal residence on August 28, 2005 was in the defined Katrina disaster area.*
  • They are displaced from the principal residence.
    • * If the displaced individuals are not in the core disaster area, they still qualify as long as the residence was damaged by Katrina or they were evacuated from the principal residence because of Katrina.

    Once you determined that the taxpayer is housing a displaced individual, the regulations for claiming the additional personal exemptions are:
  • The additional $500 exemption is only allowed in tax years 2005 and 2006.
  • A displaced individual can only be claimed one time for both tax years.
  • The additional exemption is available only to a natural person. In other words, a business entity cannot claim an exemption for housing a Katrina victim in corporate facilities.
  • The $500 exemption is limited to $2,000 per taxpayer for both years. For married filing joint taxpayers, the total limitation would be $4,000 since they are each eligible for the $2,000 limitation.
  • The displaced individual is not the taxpayer's spouse or dependent.
  • The displaced individual lived in the taxpayer’s principal residence free of any housing charges for a minimum period of 60 consecutive days. The 60 days must end in the tax year that the exemption is being claimed. The taxpayer can be reimbursed for items that do not relate to typical housing costs such as food, clothing, personal items, long distance phone calls, and gasoline for use in an automobile. The taxpayer cannot be reimbursed for typical housing costs such as increased electric and water bills.


    • The additional personal exemption can only be claimed on Forms 1040, 1040A, and 1040NR. Form 8914 is a new form that will be used to calculate the additional exemption for the displaced individuals. It will collect the following information on each displaced individual for which the exemption is being claimed:
  • Name
  • SSN
  • Former address in the disaster area
  • Number of consecutive days lived with taxpayer


    • The computation for the regular personal exemptions and additional personal exemption for displaced individuals will be combined onto this form and carried to the appropriate line on the 1040, 1040A, or 1040NR. The additional $500 exemption will not be included for AMT (Alternative Minimum Tax) calculation purposes.

    From December 2005

    Back to Archives