Here's how hurricane victims can get tax relief
By Bill Bischoff
Congress passed the Disaster Tax Relief and Airport and Airway Extension Act of 2017
Congress passed the new Disaster Tax Relief and Airport and Airway Extension Act of 2017, and President Trump signed it into law on Sept. 29. The new law delivers some welcome tax relief to the victims of Hurricanes Harvey, Irma and Maria. Here's what affected individuals need to know.
Liberalized casualty loss deduction rules
Under the usual federal income tax rules for personal casualty loss itemized deductions, the uninsured loss must first be reduced by $100 and then reduced again by 10% of adjusted gross income (AGI). So your loss is only deductible to the extent it exceeds 10% of AGI plus $100. However, the $100 and 10%-of-AGI subtractions don't apply to business casualty losses. You can deduct them in full as a business expense. If your loss occurs in 2017 in a federally declared disaster area, you can deduct it this year's return or on an original or amended 2016 return. If you claim the deduction in 2016, you can get your tax savings quicker because you don't have to wait until after filing your 2017 return sometime next year. For more details on the rules that usually apply to disaster-related casualty losses, check out: See if you can write off your Hurricane Harvey and Irma losses on your taxes (http://www.marketwatch.com/story/see-if-you-can-write-off-your-hurricane-harvey-and-irma-losses-on-your-taxes-2017-09-11).
The new law offers liberalized rules for qualified disaster-related personal losses. These are losses that arose in: (1) the Hurricane Harvey disaster area after 8/22/17 due to Hurricane Harvey, (2) the Hurricane Irma disaster area after 9/3/17 due to Hurricane Irma, or (3) the Hurricane Maria disaster area after 9/15/17 due to Hurricane Maria. For these losses, the new law increases the first subtraction from $100 to $500 but eliminates the much more hurtful 10%-of-AGI subtraction. So after subtracting $500 from your loss, you can deduct the remainder in full. You can deduct that amount even if you don't itemize or are subject to the AMT. You can claim your rightful deduction on: (1) your 2017 Form 1040, (2) an amended 2016 return if you've already filed for last year, or (3) your original 2016 return if you've not yet filed it.
Liberalized IRA and retirement plan rules
The new law also offers liberalized rules for the tax treatment of IRA and qualified retirement plan distributions made to individuals affected by Hurricanes Harvey, Irma, and Maria and for retirement plan loans made to these individuals.