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M&O: Information on the Disaster Tax Relief Act

Posted by McDonald & Osborne Posted on Oct 18 2017


On September 29, President Trump signed the “Disaster Tax Relief and Airport and Airway Extension Act of 2017.” The Act provides temporary tax relief to victims of Hurricanes Harvey, Irma, and Maria and includes, among other things, the following:


Loosened restrictions for claiming personal casualty losses –

  • The act eliminates the requirement that a personal casualty loss must exceed 10% of adjusted gross income to qualify for a deduction.
  • The casualty loss deduction is also now available to taxpayers who do not itemize deductions.
  • Casualty losses can be deducted on either the original return for the year the loss was incurred (2017) or on an amended return for 2016.


Tax favored withdrawals from retirement plans –

  • The act eases a number of rules to allow victims to make “qualified hurricane distributions” from their retirement plans of up to $100,000.
  • The resulting distributions are not subject to 10% early withdrawal penalty.
  • Income inclusion resulting from qualified hurricane distributions from retirement plans may be spread out over a 3 year period.


Suspension of limitations on charitable contributions –

  • The act temporarily suspends the majority of limitations on charitable contributions for hurricane relief made to qualifying organizations beginning on August 23, 2017 and ending on December 31, 2017.
  • Contributions must be substantiated, with a contemporaneous written acknowledge that the contribution was or is to be used for relief efforts.


New employee retention tax credit –

  • The act creates a new “employee retention credit” equal to 40% of up to $6,000 of qualified wages with respect to each eligible employee for the tax year.
  • The credit applies to employers that conducted an active business in a disaster zone affected by Hurricane Irma that was rendered inoperable as a result of damage sustained by the hurricane as of September 4, 2017 through January 1, 2018.


When reviewing your personal casualty losses, please keep in mind that a deduction for casualty losses is only available for physical damage or loss to your property.  To substantiate your loss, original receipts, repair costs and appraisals can establish pre and post loss values.  To the extent you are insured, you must reduce your loss by the reimbursement.  Be sure to report your losses to your insurance company even if the deductible is higher than the loss you sustained.  If you fail to file an insurance claim, the IRS may reduce your loss by the insurance reimbursement you could have received.


The act also provides for postponed filing and payment deadlines and penalty relief.  The IRS has postponed deadlines for making quarterly estimated tax payments and for filing tax returns that have previously been granted an extension to file to January 31, 2018.


If you think you may qualify under the provisions of this new law and have questions, please feel free to contact our office. We will be happy to assist you.