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previous page Previous Page: Publication 4492-B - Information for Affected Taxpayers in the Midwestern Disaster Area - IRAs and Other Retirement Plans
next page Next Page: Publication 4492-B - Information for Affected Taxpayers in the Midwestern Disaster Area - Additional Tax Relief for Businesses
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taxmap/pubs/p4492b-006.htm#en_us_publink1000135478

Additional Tax Relief for Individuals(p8)


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previous topic occurrence Additional Tax Relief for Individuals next topic occurrence

taxmap/pubs/p4492b-006.htm#en_us_publink1000135479

Earned Income Credit and  
Child Tax Credit(p8)


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previous topic occurrence Earned Income Credit and Child Tax Credit next topic occurrence

This benefit applies to the counties in both Tables 1 and 2. 
 
You can elect to use your 2007 earned income to figure your earned income credit (EIC) and additional child tax credit for 2008 if:
  1. Your 2008 earned income is less than your 2007 earned income, and
  2. At least one of the following statements is true.
    1. Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 1.
    2. Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 2, and you were displaced from that home because of the severe storms, tornadoes, or flooding.
taxmap/pubs/p4492b-006.htm#en_us_publink1000135480

Earned income.(p8)


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For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit.
taxmap/pubs/p4492b-006.htm#en_us_publink1000135481

Joint returns.(p8)


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If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. If you make the election, your 2007 earned income is the sum of your 2007 earned income and your spouse's 2007 earned income.
taxmap/pubs/p4492b-006.htm#en_us_publink1000135482

Making the election.(p8)


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If you make the election to use your 2007 earned income, the election applies for figuring both the EIC and the additional child tax credit. However, you can make the election for the additional child tax credit even if you do not take the EIC.
Electing to use your 2007 earned income can increase or decrease your EIC. Take the following steps to decide whether to make the election.
  1. Figure your 2008 EIC using your 2007 earned income.
  2. Figure your 2008 additional child tax credit using your 2007 earned income for EIC purposes.
  3. Add the results of (1) and (2).
  4. Figure your 2008 EIC using your 2008 earned income.
  5. Figure your 2008 additional child tax credit using your 2008 earned income for additional child tax credit purposes.
  6. Add the results of (4) and (5).
  7. Compare the results of (3) and (6). If (3) is larger than (6), it is to your benefit to make the election. If (3) is equal to or smaller than (6), making the election will not help you.
If you elect to use your 2007 earned income and you are claiming the EIC, enter "PYEI" and the amount of your 2007 earned income on the dotted line next to line 64a of Form 1040, on the line next to line 40a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ.
If you elect to use your 2007 earned income and you are claiming the additional child tax credit, enter your 2007 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line.
taxmap/pubs/p4492b-006.htm#en_us_publink1000135483

Getting your 2007 tax return information.(p8)


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If you do not have your 2007 tax records, you can get the amount of earned income used to figure your 2007 EIC by calling 1-866-562-5227. You can also get this information by visiting the IRS website at www.irs.gov.
If you prefer to figure your 2007 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. See Request for Copy or Transcript of Tax Return on page 11.
taxmap/pubs/p4492b-006.htm#en_us_publink1000135484

Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding(p8)


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Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding

This benefit applies to the counties in both Tables 1 and 2. 
 
You may be able to claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by the severe storms, tornadoes, or flooding. The additional exemption amount is claimed on Form 8914. The additional exemption amount is allowable once per taxpayer for a specific individual in 2008 or 2009, but not in both years. The maximum additional exemption amount you can claim for all displaced individuals is $2,000 ($1,000 if married filing separately). The additional exemption amount you claim for displaced individuals in 2008 will reduce the $2,000 maximum for 2009. If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. If married filing separately, only one spouse can claim the additional exemption amount for a specific displaced individual. In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). To qualify as a displaced individual, the individual:
  1. Must have had his or her main home in a Midwestern disaster area on the applicable disaster date, and he or she must have been displaced from that home. If the individual's main home was located in a Midwestern disaster area as shown in Table 2, that home must have been damaged by the severe storms, tornadoes, or flooding or the individual must have been evacuated from that home because of the severe storms, tornadoes, or flooding,
  2. Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and
  3. Cannot be your spouse or dependent.
You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following.
However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual.
Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount.
For more information, see Form 8914.
taxmap/pubs/p4492b-006.htm#en_us_publink1000135485

Education Credits(p9)


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previous topic occurrence Hope and Lifetime Learning Credits next topic occurrence

This benefit applies only to the counties in Table 1. 
 
The education credits have been expanded for students attending an eligible educational institution located in a Midwestern disaster area (Midwestern disaster area students) for any tax year beginning in 2008 or 2009. The Hope credit for a Midwestern disaster area student is increased to 100% of the first $2,400 in qualified education expenses and 50% of the next $2,400 of qualified education expenses for a maximum credit of $3,600 per student. The lifetime learning credit rate for a Midwestern disaster area student is increased from 20% to 40%.
The definition of qualified education expenses for a Midwestern disaster area student also has been expanded. This expanded definition also applies to the tuition and fees deduction claimed on Form 8917. In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a Midwestern disaster area student include the following.
  1. Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution.
  2. For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution.
  3. For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts.
    1. The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
    2. The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.
You will need to contact the eligible educational institution for qualified room and board costs.
For more information, see Form 8863. See Form 8917 for the tuition and fees deduction.
taxmap/pubs/p4492b-006.htm#en_us_publink1000135486

Recapture of Federal Mortgage Subsidy(p9)


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previous topic occurrence Recapture of Federal Mortgage Subsidy next topic occurrence

This benefit applies only to the counties in Table 1. 
 
Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. This amount is increased to $150,000 if the loan was provided before 2011 and was used to alter, repair, or improve an existing owner-occupied residence in a Midwestern disaster area as shown in Table 1.
taxmap/pubs/p4492b-006.htm#en_us_publink1000135487

Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding(p9)


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Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding

This benefit applies to the counties in both Tables 1 and 2. 
 
Generally, discharges of nonbusiness debts (such as mortgages) made on or after the applicable disaster date and before January 1, 2010, are excluded from income for individuals whose main home was in a Midwestern disaster area on the applicable disaster date. If the individual's main home was located in a Midwestern disaster area as shown in Table 2, the individual also must have had an economic loss because of the severe storms, tornadoes, or flooding. Examples of an economic loss include, but are not limited to:
  1. Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause;
  2. Loss related to displacement from your home; or
  3. Loss of livelihood due to temporary or permanent layoffs.
This relief does not apply to any debt secured by real property located outside a Midwestern disaster area.
You may also have to reduce certain tax attributes by the amount excluded. For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).
taxmap/pubs/p4492b-006.htm#en_us_publink1000135488

Tax Relief for Temporary Relocation(p10)


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previous topic occurrence Tax Relief for Temporary Relocation next topic occurrence

This benefit applies only to the counties in Table 1. 
 
The IRS can adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2008 or 2009 as a result of a temporary relocation caused by the severe storms, tornadoes, or flooding. However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. The IRS has exercised this authority as follows.
previous pagePrevious Page: Publication 4492-B - Information for Affected Taxpayers in the Midwestern Disaster Area - IRAs and Other Retirement Plans
next pageNext Page: Publication 4492-B - Information for Affected Taxpayers in the Midwestern Disaster Area - Additional Tax Relief for Businesses
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication