Hurricane Irma Tax Relief
- Casualty Losses
- Retirement Plan withdrawals
- Earned Income Credit and Child Tax Credit
- Charitable Contributions Limitation
- Disaster Area Losses
H.R. 3823, the “Disaster Tax Relief . . . Act of 2017” gives tax relief to victims of Hurricane Irma. Here are some of the ways that this Act does this.
Casualty Loss Rules become less restrictive
A taxpayer can deduct casualty losses relating to their home, household items, and vehicles. There were two restrictions though that made claiming a casualty loss difficult. Both of these restrictions have been removed for Hurricane Irma victims. They are:
- 10% Limitation - Personal casualty losses had to exceed 10% of our Adjusted Gross Income in order for you to claim the loss. This 10% Limitation has been removed for us.
- Itemized Deduction – You had to itemize your deductions. Now that you don’t have to itemize, your loss deduction gets added to your standard deduction for those that don’t itemize.
Retirement Funds are easier to Access
Taxpayers have had to pay a penalty if they take a distribution from their retirement accounts. The new law makes the following changes to Hurricane Irma victims:
- Qualified Hurricane distributions are exempt from the 10% retirement plan early withdrawal penalty.
- The amount distributed can be re-contributed at any time over a three-year period.
Earned Income & Child Tax Credit special rule
If the earned income of the taxpayer is less than the taxpayer’s earned income for the preceding year, you can (for the EIC and Child Tax Credit) use last year’s income. You obviously would only want to do this if it gave you larger tax credits.
Charitable Contributions Limitation is suspended
A taxpayer is normally limited to claiming as a tax deduction a certain percentage of their Adjusted Gross Income (it’s usually 50%). This limitation is suspended for Hurricane Irma victims. You’re probably thinking, “Who donates half of their income to charity?”. I don’t anybody who does, but, I put it out there in case someone wanted to.
Please contact us at 305-363-5429 if you have questions.