Relief Extended to Hurricanes Rita and Wilma Victims

December 30, 2005 ( - Victims of Hurricanes Rita and Wilma have been extended retirement plan tax relief similar to that afforded to victims of Hurricane Katrina.

Thompson reports that Congress has passed the Gulf Opportunity Zone Act of 2005 (GOZA) giving aid to those whose principal residence was in the Rita disaster area as of September 23, 2005 or in the Wilma disaster area as of October 23, 2005.

Provisions of GOZA mimic those of the Katrina Emergency Tax Relief Act (KETRA), signed into law by President Bush in September (See  Bush Storm Relief Bill Includes Plan Distribution, Loan Provisions).

Like KETRA, GOZA waives the usual 10% early withdrawal penalty on retirement plan distributions between September 23, 2005 and January 1, 2007 for Rita victims, and between October 23, 2005 and January 1, 2007 for Wilma victims for aggregate distributions not exceeding $100,000.   Individuals receiving qualified hurricane distributions may also spread out their taxation over a three-year period or repay the distributions to the plan to avoid taxes altogether.

GOZA also increases the retirement plan loan limit for affected individuals to $100,000 or 100% of their vested account balance, whichever is less, from the normal limit of $50,000 or 50% of vested balance limit.   Repayments can be delayed for one year for a qualified individual with a payment due date on December 31, 2006.    Additionally, the one-year period can be disregarded in determining the usual five-year repayment period.

The complete text of the bill is  here .