With Hurricane season upon us and the current wildfires going on in the United States some people are asking the question “ Is there tax relief for Natural Disasters?”
The IRS has announced that victims of Hurricane Ida that began August 26, 2021 and California wildfires that began July 14, 2021 now have until January 3, 2022 and November 15, 2021 respectively to file various individual and business tax returns and make tax payments.
Individuals and households who reside or have a business anywhere in the state of Louisiana will receive tax relief from the effects of Hurricane Ida. Individuals and households affected by wildfires that reside or have a business in Lassen, Nevada, Placer, and Plumas counties also qualify for tax relief based on the effects of California wildfires.
Fortunately, homeowners can deduct personal losses from their tax return as long as the property is located on Presidentially declared disaster area and if it meets the following criteria:
- The loss was sudden, unexplained, or an unusual event. Natural disasters such as flooding, hurricanes, tornadoes, and wildfires all qualify as sudden, unexplained, or unusual events.
- The damages the homeowner is deducting were not covered by their homeowner’s insurance.
- The losses were large enough to go over any reductions required by the IRS. The IRS requires several “reductions” to claim casualty losses on your tax forms.
The first is that you must subtract $100 from the total loss amount for each casualty event. This is referred to as the $100 loss limit.
Second, you must reduce the amount by 10 percent of your adjusted gross income (AGI) or adjusted gross income from the total casualty losses for the year. For example, if your AGI is $25,000 and your insurance company paid for all of the losses you incurred due to flooding except $3,100, you would first subtract $100 and then reduce that amount by $2500. The amount you could deduct as a loss would be $500.
Are you entitled to tax relief because of Natural Disaster?
- 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 is necessary for filing a joint return?
The IRS has the ability to automatically identify and provide relief for individuals, households, and businesses in the affected areas, but for those who are experiencing the effects can call the IRS disaster hotline at 866-562-5227 to request this tax relief if they are not automatically identified. For more information on disaster recovery, visit DisasterAssistance.gov.