Understanding the Tax Impacts of the 2024 Hurricane Season
The Internal Revenue Service has announced various tax relief programs for those that were affected by Hurricane Debby, Hurricane Helene, and Hurricane Milton.
Casualty Loss Deductions
One of the key tax considerations for individuals impacted by a hurricane is the ability to claim casualty losses. The IRS allows taxpayers to deduct losses from federally declared disaster areas. If your home or personal property were damaged, you may qualify for a casualty loss deduction. Some things to keep in mind regarding casualty losses are:
• Eligibility: Casualty losses can be claimed for personal property, including your home, car, or personal belongings. Business property losses are also eligible but may have different rules.
• Calculation: To determine the deductible amount:
– Assess the decrease in the fair market value of the property due to the casualty.
– Consider any insurance reimbursements received.
– The loss must be reduced by any salvage value, if applicable.
• Threshold: For personal property losses, the deductible amount is calculated as the loss amount (after insurance) minus $100 plus 10% of your adjusted gross income (AGI).
• Filing: Casualty losses are reported on Form 4684 and are typically claimed as itemized deductions on Schedule A of your tax return.
• As of the date of this blog, the IRS has not designated the areas affected by the Hurricane’s mentioned above as “qualified” disaster areas. Because these areas are not designated as “qualified”, they are subject to the 10% of AGI rule listed above.
Other Relief Available
Retirement Plan Withdrawals – Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.
SBA Loans – The SBA is offering disaster loans to individuals and businesses who were affected by the Hurricanes. This includes Personal Home disaster loans up to $500,000 for residences and up to $100,000 for belongings with a term of up to 30 years and interest rates not to exceed 4%. You can access this info via the SBA website: https://www.sba.gov/funding-programs/disaster-assistance/hurricane-milton
Property Tax Relief – The state of Florida is offering property tax relief for storm victims. Taxpayers who own residential property within Florida that was severely damaged by recent hurricanes may be eligible for a refund on property taxes paid. To qualify, the property must be deemed “uninhabitable” for at least 30 days. The property owner must file an application (Form DR-465) and supporting documentation with the property appraiser’s office in the county where the property is located by March 1, 2025. For more details, check your local counties website.
Qualified Disaster Relief Payments – Are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details.
Florida based taxpayers have more time to file and pay
Due to the destruction caused by Hurricane Milton in Florida beginning on October 5, 2024, and combined with earlier tax relief provided for taxpayers in counties affected by Hurricane Debby and Hurricane Helene, affected taxpayers in all of Florida now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments, including 2024 individual and business returns normally due during March and April 2025 and 2023 individual and corporate returns with valid extensions and quarterly estimated tax payments.
The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Oct. 5, 2024, and before May 1, 2025, are granted additional time to file through May 1, 2025. As a result, affected individuals and businesses will have until May 1, 2025, to file returns and pay any taxes that were originally due during this period.
The May 1, 2025, filing deadline applies to:
• Any individual or business that has a 2024 return normally due during March or April 2025.
• Any individual, C corporation or tax-exempt organization that has a valid extension to file their calendar-year 2023 federal return. The IRS noted, however, that payments on these returns are not eligible for the extra time because they were due last spring before the hurricane occurred.
• 2024 quarterly estimated tax payments normally due on Jan. 15, 2025, and 2025 estimated tax payments normally due on April 15, 2025.
• Quarterly payroll and excise tax returns normally due on Oct. 31, 2024, Jan. 31, 2025, and April 30, 2025.
In addition, penalties on payroll and excise tax deposits due on or after Oct. 5, 2024, and before Oct. 21, 2024, will be abated if the tax deposits were made by Oct. 21, 2024. Most counties in Florida qualify. For a detailed list of all the counties included please see link below:
Individuals and businesses affected by Hurricane Debby with filing deadlines after August 1, 2024 are also eligible to take advantage of the May 1, 2025 extended deadline in many counties in Florida including Pinellas, Hillsborough, Pasco and Polk. For a detailed list of all the counties included please see link below:
What If the taxpayer is not affected by the hurricanes but the tax preparer is?
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. However, a taxpayer does not have to be located in a federally declared disaster area to be an “affected taxpayer.” According to the IRS, “Taxpayers are considered ‘affected’ if records necessary to meet a filing or payment deadline postponed during the relief period are located in a covered disaster area.” This means if you are an SBF client, you still may be eligible for relief regarding filing and/or payment deadlines depending on which services our firm provides for you.
Other State(s) Tax Relief
The Internal Revenue Service has announced disaster tax relief for all individuals and businesses affected by Hurricane Helene, including the entire states of Alabama, Georgia, North Carolina and South Carolina and parts of Florida, Tennessee and Virginia.
Taxpayers in these areas now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments. Among other things, this includes 2024 individual and business returns normally due during March and April 2025, 2023, individual and corporate returns with valid extensions and quarterly estimated tax payments.
Filing and Payment Relief – The tax relief postpones various tax filing and payment deadlines that occurred beginning on:
• Sept. 22, 2024, in Alabama,
• Sept. 23 in Florida,
• Sept. 24 in Georgia,
• Sept. 25 in North Carolina, South Carolina and Virginia, and
• Sept. 26 in Tennessee.
