Individual Tax Relief for Disaster Areas

In the wake of this year’s devastating hurricane season, the President signed into law the “Disaster Tax Relief and Airport and Airway Extension Act of 2017” (the Act). This law provides temporary tax relief through several provisions for individuals and businesses affected by Hurricanes Harvey, Irma, and Maria.

Likely the most beneficial provisions of the Act are the easement of account access to a taxpayer’s retirement plan and the ability to recoup taxes paid on the qualified hurricane distribution. The Act states that a taxpayer in a disaster zone is eligible to withdraw a “qualified hurricane distribution” of up to $100,000 (an increase of the allowable loan amount from $50,000 to $100,000), without paying the 10% early withdrawal penalty mandated for pre-retirement withdrawals. It also removes the requirement that the participant cannot receive more than 50% of their account balance. Furthermore, the Act allows the taxpayer to disperse over a three-year period any income inclusion related to this distribution.

A qualified taxpayer can recontribute the amount of the distribution at any time over a three-year period. If the distribution is recontributed, the taxpayer can recoup any tax on the qualified hurricane distribution paid during the year (or previous year).   For example: A plan participant receives a qualified hurricane distribution of $100,000 in 2017. The participant is required to include a sum of $33,333 in taxable income in 2017, 2018 and 2019. If, in 2018, the taxpayer recontributes the $100,000 into his or her retirement plan account, the taxpayer can then amend the 2017 income tax return to receive a refund of any taxes paid on the $33,333 inclusion amount.

Some of the Act’s other provisions include deductions taxpayers may take on their individual income tax returns, and the removal of certain restrictions on qualified charitable contributions and casualty losses. The Act suspends limitations, eases rules for excess contributions, and provides an exception from the overall limitation on itemized deductions for charitable contributions. Casualty losses are no longer limited. The requirements that the loss must exceed 10% of a taxpayer’s adjusted gross income, and that an individual must itemize his or her deductions (versus taking the standard deduction) to benefit from a casualty loss deduction, have been removed.

In addition, taxpayers in a disaster area have been granted further relief if they have not yet filed their 2016 business or individual tax returns. Tax returns originally due on September 15 and October 15 are granted an additional extension of time to complete these filings to January 31, 2018.

This article is merely an overview of the Act; additional provisions have not been covered here. If you have questions about other ways the 2017 Disaster Tax Relief Bill might impact you or your business, or would like to request a speaker on this topic for your organization or event, contact one of our PYA executives below at (800) 270-9629.

 

Related executives:

Eric Elliott

Shannon Euart


Eric Elliott

Eric Elliott

Principal

Shannon Euart

Shannon Euart

Senior Manager

Related Posts
An on-demand webinar, presented by Mike Shamblin, CPA, and brought to you by PYA, helps lay the foundation for the new revenue recognition standard.  The webinar guides healthcare providers of...
Read More

PYA On-Demand Webinar Outlines the New Revenue Recognition Standard in Preparation for Implementation

Qualified conservation easements are becoming an increasingly popular way to save on your tax bill, but what exactly is a conservation easement, and what do you need to know to...
Read More

Conservation Easements: Save the Land, Save Your Money

Blockchain technology, one of the biggest technology developments in years, has the potential to transform the accounting and audit (A&A) industry. The potential benefits are numerous, but so are the...
Read More

Blockchain Technology—An Audit and Accounting Awakening

In one of the most unpredictable and hotly contested presidential races in United States history, Donald Trump promised, if elected, to pass, among other things, massive tax reform that would...
Read More
tax reform

Tax Reform—What Stays, What Goes, What’s Left?

Guidance on accounting for share-based payment awards is clear...unless it isn't. The Financial Accounting Standards Board (FASB) offered advisement on this very topic in its Accounting Standards Codification (ASC), Compensation—Stock...
Read More

Share-Based Payment Awards: An Update on Modification Accounting

The growing popularity of companies like Airbnb and Vacation Rentals By Owner (VRBO), has many Americans considering renting out their homes, or even specific rooms in their homes,  in hopes...
Read More

Tax Rules to Know When Renting Your Home

Securing fidelity bond coverage as part of your retirement plan is a step in the right direction toward safeguarding your business from mishandled funds, mismanagement, and abuse. Further, it is...
Read More

The Importance of Fidelity Bond Coverage in Your Retirement Plan

PYA was ranked highly for female percentage ownership among the 100 largest accounting firms in the U.S. by Inside Public Accounting. PYA, a national management consulting and accounting firm, has...
Read More

PYA One of the Highest Female Percentage Ownership Among Top 100 U.S. Accounting Firms

The Internal Revenue Service (IRS) recently reported the first revocation of a hospital’s tax-exempt status under the Internal Revenue Code (IRC) Section 501(r) requirements of the Affordable Care Act (ACA)....
Read More

Tax-Exempt Status Revoked: Is Your Hospital’s Tax-Exempt Status Safe?

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop