On Sept 29th, President Trump signed into law the “Disaster Tax Relief and Airway Extension Act of 2017.” Among the things passed are loosened restrictions for claiming personal casualty losses, tax-favored withdrawals from retirement plans etc. I will discuss some of these provisions in several posts. If you have suffered any significant damage from Hurricanes Harvey, Irma, or Maria that won’t be compensated by insurance, you will probably find that these posts contain essential information.
Eased casualty loss rules: Generally, you may claim a deduction for any loss on damaged property sustained during a year and not compensated by insurance. However, there are some strict limits and thresholds that you must meet in order to claim damages from destroyed or damaged property.
Generally, the loss is deductible only to the extent that (1)it exceeds $100 and (2) all casualty losses, after application of this $100 floor, for the tax year exceeds a whopping 10% of your adjusted gross income (AGI). If the disaster occurs in a federally declared disaster area, you can elect to take the casualty loss in the preceding years in which the disaster occurs. Finally, even if your loss exceeds these thresholds, you must claim the loss as an itemized deduction. Thus, if you don’t itemize your deductions, you wouldn’t benefit from the loss.
New law change: The act makes a number of changes in this for: If you suffer damages as a result from Hurricane Harvey, Irma, or Maria, the 10% limitation is removed. Thus, there will be no threshold of 10% of your AGI that you must exceed. This is a big deal that will allow for many more people to claim losses.
In addition, normally, you have to itemize your deductions in order to claim these losses. However, under the new law, you can claim losses due to these hurricanes without having to itemize your deductions, which is another big deal.
However, Congress can’t-do anything right. The new law increases the $100 per casualty floor to $500 for qualified disaster-related personal casualty losses.
In part two, I will discuss eased access to retirement funds to help pay to rebuild your home.
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