If you have experienced any losses due to Hurricane Irma, you may be entitled to special tax relief.
The 2017 Disaster Relief Act declared parts of Florida, Georgia, the U.S. Virgin Islands and Puerto Rico as federally declared disaster zones, and created the following tax benefits to ease the financial burdens of the disaster.
- You may claim your casualty loss deduction in either the year before the casualty (2016) or in the year of the casualty (2017). Claiming your deduction on your 2016 tax return results in getting your tax refund earlier (and possibly a larger refund).
- Casualty losses to personal (non-business) property are normally deductible only if they exceed 10% of your adjusted gross income. The Act removes this limitation for damages caused by Irma.
- You are able to claim a personal casualty loss even if you do not claim itemized deductions by adding the loss to your standard deduction. The additional standard deduction is not added back for purposes of the alternative minimum tax like the regular standard deduction is.
- If you live in the Hurricane Irma disaster area:
- Your tax return filing and payment deadlines that occurred after September 4th in Florida and after September 7th in Georgia are postponed until January 18, 2018. This would include your extended 2016 individual tax return and 2017 estimated tax payments. The postponed deadline does not apply to the balance owed on your 2016 individual tax return which would have been due when your return was extended in April.
- You are able to take an early withdrawal from your retirement plan (such as an IRA) of up to $100,000 without a 10% penalty (even if you are under age 59½) and without mandatory 20% withholding. Further, the tax on the distribution can be spread over a 3-year period and the tax can be avoided (or refunded) if the funds are recontributed within the 3-year period.
- You can also take a loan from your retirement plan after September 29, 2017 and before January 1, 2019 of up to $100,000 which is:
- Not subject to the normal limitation of 1/2 of the present value of the account balance, and
- Granted a longer repayment period.
- Under the normal tax rules, insurance proceeds in excess of the tax cost of your home are taxable unless used to repair your home or used to purchase a replacement home within 2 years. The Act provides a special rule for personal property located in your personal residence if it was destroyed by Hurricane Irma. In this case, any gain on the insurance proceeds for the personal property is not taxed, regardless of what the insurance proceeds are used for. In addition, the normal 2-year replacement period for your personal residence is extended to 4 years. Note that these special rules would not apply to a second (vacation) home located in the Hurricane Irma disaster area that is not your principal residence. The normal rules would continue to apply to the second home.
Your SVA advisor can assist you in maximizing these special tax benefits to ease your financial burden.