As our communities continue to recover from recent hurricanes, and with everyone knee deep in tax season, we are updating a blog from December with information from local tax professionals that might help those who have losses or damage.
Congressional action is currently needed to designate Hurricane Ian as a qualified disaster. While it has not been designated yet, on March 1, Rep. Greg Steube introduced legislation to designate Hurricane Ian as a qualified disaster to provide income tax relief for Americans still recovering from the effects of the devastating storm.
Summary: According to the IRS, unrecovered losses will be deductible, as an addition to the standard deduction, without itemizing deductions if Hurricane Ian is designated as a qualified disaster.
The following comes from Beth A. Wilson, EA, ATP, ATA, NTPI Fellow, and owner of Tax Savers in Port Charlotte, Florida:
The IRS has been asked to grant safe harbor methods for determining Hurricanes Ian casualty losses for personal residences and belongings. There are safe harbor tables which will provide a way to determine measurement of decline in fair market values. The result will be that unrecovered losses will be deductible as an addition to the standard deduction [if Hurricane Ian is a qualified disaster]. I hope this encourages everyone to keep records of their loss.
Qualified Disaster Relief
Qualified Disaster Relief will apply if you are affected by a “Qualified Disaster,” which is a disaster that is federally declared, referred to as Section 165 Relief.
In general, to qualify for Section 165 Relief the following need to be met:
-
- It must be attributable to a federally declared disaster.
- You must include the FEMA code assigned to the disaster.
- The loss must exceed $100 per casualty, then increases to $500 for net qualified losses. Note, you must reduce your personal casualty loss by $500, after any salvage value or reimbursement.
- There is a 10% adjusted gross income limit, but this does not apply to net qualified disaster losses. Taxpayers are allowed a deduction for the entire portion of the disaster loss, not covered by insurance or other forms of reimbursements, such as from employers, that exceeds $500.
- Taxpayers may increase their standard deduction by the amount of their net qualified disaster relief rather than itemizing deductions on Schedule A.
It is imperative that all taxpayers keep adequate records of all repairs, purchases, and reimbursements. The failure to maintain these records and receipts can cost you the relief.
As a community bank, we are actively seeking ways to enrich the lives of our customers and our communities. We seek to share this solely for informational purposes and this information is not a substitute for legal or tax advice. Crews Bank & Trust and its representatives are unable to provide legal or tax advice. Please consult an appropriate advisor regarding any legal or tax consequences.
