The recent devastation following Hurricane Harvey and Hurricane Irma have left a lot of businesses struggling to pick up the pieces and move forward. Distressed individuals and businesses are filing insurance claims that often, substantially fail to make them “whole” and provide less than adequate compensation allowing them to rebuild.
Among other government resources, the IRS provides tax benefits to help alleviate the economic burden many taxpayers face after a natural disaster. With careful planning, a taxpayer can mitigate this burden by ensuring losses, recoveries, re-investments, and charitable contributions are correctly accounted for.
Generally, IRC 165 allows a casualty deduction for property that is deemed completely worthless and not compensated by insurance.
The Disaster Tax Relief Act, recently passed by Congress and signed by President Trump, provides additional benefits.
Big picture, this new act will allow:
- Personal casualty losses less than 10% of AGI (Adjusted Gross Income) to qualify for the deduction;
- Extends casualty losses to include food spoilage, landscaping, and roofing due to electricity issues;
- Provides victims penalty-free access to retirement funds used for hurricane-related expenditures;
- Temporarily suspends charitable deduction limitations for such made to hurricane disaster areas;
- Provides a tax credit of 40% of wages paid per employee to a disaster-affected employer; and
- Allows taxpayers to use earned income calculations from 2016 tax year.
If you are uncertain as to the benefits you are entitled, speak to a Tax Problem Solver attorney today.