BREAKING NEWS: Additional Tax Relief for Hurricane Victims

[Lance Lvovsky]

A bill passed the House yesterday that would grant additional relief on top of what the IRS granted immediately after Hurricanes Harvey, Irma, and Maria. As some of you know, immediately after the Hurricanes, the IRS granted relief to affected taxpayers. This relief granted by the IRS was more "procedural" in nature, as opposed to monetary relief. HOWEVER, this bill which just passed the House and now moves to the Senate can potentially save taxpayers thousands of dollars. It appears the bill would include affected taxpayers in Texas, Florida, Puerto Rico, and the Virgin Islands.

I highlighted below the two measures that would most positively affect individuals on BP. Keep in mind that personal casualty losses are related to your primary residence. While the bill proposes to allow for penalty-free accesss to retirement funds, tax-deferred accounts (Traditional IRA/401k) would still be subject to ordinary income on distributions.

Two very important considerations: 

1. We now need to wait to see if the Senate will pass this bill. 

2. Consult with your CPA before taking ANY ACTION. It is likely there will be monetary limits on penalty-free access to retirement funds, for example, and this is something your CPA should answer. In addition, there will be other guidelines that must be followed.

Nothing here is binding, and this is not tax advice to anyone on these forums. This is merely to inform you. Additional information can be found here:

https://waysandmeans.house.gov/brady-releases-legi...

http://docs.house.gov/billsthisweek/20170925/HR___...

In summary, the bill proposes:

Deduction for Personal Casualty Losses:

• • With respect to uncompensated losses arising in the disaster area, eliminates the current law requirements that personal casualty losses must exceed 10 percent of Adjusted Gross Income to qualify for deduction.
  • Eliminates the current law requirement that taxpayers must itemize deductions to access this tax relief.

  Penalty-Free Access to Retirement Funds:

  • Provides an exception to the 10 percent early retirement plan withdrawal penalty for qualified hurricane relief distributions.
  • Allows for the re-contribution of retirement plan withdrawals for home purchases cancelled due to eligible disasters.
  • Provides flexibility for loans from retirement plans for qualified hurricane relief.

  Encouraging Charitable Giving:

  • Temporarily suspends limitations on the deduction for charitable contributions associated with qualified hurricane relief made before December 31, 2017.

  Disaster-Related Employment Relief:

  • Provides a tax credit for 40 percent of wages (up to $6,000 per employee) paid by a disaster-affected employer to an employee from a core disaster area.

  Special Rule for Determining 2017 Earned Income Tax Credit and Child Tax Credit:

  • For 2017, allows taxpayers to refer to earned income from the immediately preceding year for purposes of determining the Earned Income Tax Credit and Child Tax Credit.