Recent years have brought an unheard of number of natural disasters to the shores of the US. Property losses are being experienced by a lot of people. But there’s specific tax relief to help with that if you’re the victim of a natural disaster.
The IRS has provided extended tax deadlines and other forms of tax relief to the victims of natural disasters. They’ve even relaxed casualty loss rules and made it easier to access your retirement funds. If you live in Federal disaster areas, you may qualify for that relief.
Check your area out on the FEMA website to confirm that you live in one of those areas.
Table of Contents
Who’s Entitled to Tax Relief?
This guide will show you whether you’re entitled to any disaster tax relief.
- Is your business or primary residence located in a disaster area?
- Are you a relief worker operating in a disaster area?
- Is your business or primary residence outside of a disaster area but your records necessary for filing are in a disaster area?
- Does your trust or estate have tax records located within a disaster area?
- Is your spouse living in, working in, or have records located within a disaster area that are necessary for filing a joint return?
How to Claim Casualty Loss for a Natural Disaster?
You may be eligible to claim casualty losses as an itemized deduction you should know that the initial $100 of loss is not deductible. But you can claim anything else that’s over 10% of your adjustable gross income. Any losses that you have been reimbursed for through insurance or disaster funds from the Federal government won’t be able to be deducted.
You have two options when claiming casualty losses as deductible. Most people claim the loss in the year it happened, but you can also take the deduction through the previous year’s tax return. This will give you the benefits of the deduction faster.
The due date of your current return is the deadline for making a decision. You can use Form 1040X via online tax filing to make any amendments in the event that you’ve already filed. You should write ‘Disaster’ in red at the top, along with the name and state of the area that currently falls into a designated disaster zone.
The Disaster Tax Relief and Airport and Airway Extension Act of 2017 offers easing of casualty loss rules for victims of the Harvey, Maria, and Irma hurricanes. For these victims, they don’t have to itemize to claim disaster loss.
Are there any Other Forms of Relief Available?
The IRS has decided to waive their standard fees and they’ll expedite the delivery of previous tax returns for victims in disaster areas. For this, Form 4506 should have the name and location of the disaster area on top of the form. The same goes for the forms Request for Copy of Tax Return, Request for Transcript of Tax Return, and 4506-T.
Your tax deduction won’t give you the funds back for all of your losses, but it will mean you pay less taxes. You’ll get both a lower tax bill and a larger refund.