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More Storm-Related Tax Relief: H.R. 3823 Signed Into Law

On Sept. 29, 2017, President Donald Trump signed into law tax provisions designed to help those affected by Hurricanes Harvey, Irma and Maria.

The Disaster Tax Relief and Airport and Airway Extension Act of 2017 (previously known as H.R. 3823) is designed to help hurricane victims get the funding they need to provide for themselves and rebuild their property and businesses from storm-related damage. The new law provides temporary tax relief in several ways:

  • 10% limitation removed. For taxpayers claiming a net disaster loss, the Act eliminates the current law’s requirement that personal casualty losses must exceed 10% of AGI to qualify for a deduction.
  • Relief available to non-itemizers. The Act also eliminates the current law requirement that taxpayers must itemize deductions to access this tax relief for losses. It does so by increasing an individual taxpayer’s standard deduction under Code Sec. 63(c) by the net disaster loss.
  • The limitation per casualty has been raised from $100 to $500.

In addition to tax deductions, the act also provides relief regarding retirement plan withdrawals to help pay for repairs or replacement of storm-damaged property:

  • Storm victims can make tax-favored withdrawals of up to $100,000 from retirement plans (up from $50,000). The amount distributed can also be contributed back to the plan at any time over a three-year period.
  • The new law provides an exception to the 10% early withdrawal penalty on retirement plans if they’re made to a person directly affected by the three aforementioned storms.

Employers in these areas can take advantage of a new employee retention credit that equals 40% of qualified wages (up to $6,000). There are also provisions for the earned income tax credit (EITC) and child tax credit (CTC). If a qualified individual’s income in 2017 is less than his or her income for the preceding tax year, he or she can use the preceding year’s income amount for EITC and CTC purposes.

There is a wide range of eligibility dates, qualifications and stipulations to consider regarding this tax relief. If you suffered damage as a result of these storms, contact your CPA firm to see if you qualify for tax relief under this act.