diff --git a/administrator/components/com_contact/models/contact.php b/administrator/components/com_contact/models/contact.php
index b06c723933c3a..90162f7fece7c 100644
--- a/administrator/components/com_contact/models/contact.php
+++ b/administrator/components/com_contact/models/contact.php
@@ -384,6 +384,31 @@ public function save($data)
 	{
 		$input = JFactory::getApplication()->input;
 
+		JLoader::register('CategoriesHelper', JPATH_ADMINISTRATOR . '/components/com_categories/helpers/categories.php');
+
+		// Cast catid to integer for comparison
+		$catid = (int) $data['catid'];
+
+		// Check if New Category exists
+		if ($catid > 0)
+		{
+			$catid = CategoriesHelper::validateCategoryId($data['catid'], 'com_contact');
+		}
+
+		// Save New Category
+		if ($catid == 0)
+		{
+			$table = array();
+			$table['title'] = $data['catid'];
+			$table['parent_id'] = 1;
+			$table['extension'] = 'com_contact';
+			$table['language'] = $data['language'];
+			$table['published'] = 1;
+
+			// Create new category and get catid back
+			$data['catid'] = CategoriesHelper::createCategory($table);
+		}
+
 		// Alter the name for save as copy
 		if ($input->get('task') == 'save2copy')
 		{
diff --git a/administrator/components/com_contact/models/forms/contact.xml b/administrator/components/com_contact/models/forms/contact.xml
index 726ef91c12b17..2dc780a6a5c3f 100644
--- a/administrator/components/com_contact/models/forms/contact.xml
+++ b/administrator/components/com_contact/models/forms/contact.xml
@@ -69,6 +69,8 @@
 			label="JCATEGORY"
 			description="JFIELD_CATEGORY_DESC"
 			required="true"
+			allowAdd="true"
+			default=""
 		/>
 
 		<field name="access"