As we begin to recover from the devastation that Hurricane Irma caused, it is important to consider the tax consequences and benefits that you may receive as a disaster victim.
Extended Due Date – IRS has extended the due date of 2016 tax returns for Hurricane Irma victims and affected taxpayers to January 31, 2018. This relief is automatic for all taxpayers located in both Florida and Georgia.
Disaster Losses – Tax law provides that you may elect to take disaster losses attributable to Hurricane Irma in the 2016 tax year. By taking the losses in the prior year, you may be eligible to claw back an additional refund of your 2016 taxes. Disaster losses include the following:
- Businesses – Eligible disaster losses include expenses paid to clean up property, losses from sales of damaged property, the cost basis of any demolished or destroyed property, or even the reduction in FMV of the property from before the storm to after (requires an appraisal and/or proof of repair costs).
- Individuals – Eligible disaster losses include expenses paid to clean up property, the cost basis of any demolished or destroyed property which exceeds $100, or the reduction in FMV of your home or other property caused by Hurricane Irma (requires an appraisal).
Additional limitations apply.
If you have insurance which potentially covers your losses, we recommend you contact your insurer and possibly an attorney regarding making a claim. Unfortunately, potentially covered disaster losses are not deductible until a claim is filed and resolved.
- 401(k) Loans – If you need additional funds to recover from Hurricane Irma, the IRS has provided that 401(k)s and other retirement plans may make loans and hardship distributions via relaxed procedures. Please note, however, loans must be repaid within 5 years to be tax-free and any hardship distributions are taxable and subject to a 10% early-withdrawal tax.
FEMA Programs – In addition to the tax relief provided, the federal government has other programs to assist in your recovery, including federal disaster loans and grants. Please see https://www.disasterassistance.gov/ to learn more and apply.
If you have any additional questions or would like us to review your potential losses, please contact our office today.