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
The new Tax Cuts and Jobs Act (TCJA) can be confusing for many-- especially small business owners.  Although many aspects of the TCJA have been discussed, one component of the...
Read More

Government Clamps Down on “Deductible Fun” for Businesses

As businesses consider the impact of the Tax Cuts and Jobs Act (TCJA) introduced late last year, the corporate tax rate is receiving substantial attention.  However, according to a 2014...
Read More

2018 Tax Reform – The Excess Loss Limitation Likely to Squeeze Owners of Cyclical Businesses

A recent Accounting Standards Update (ASU) addresses land easements and their accounting under the new lease standards.  In January 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-01 Leases:...
Read More

Land Easements—Guidance for Implementing New Lease Accounting Standards

According to its tagline, Atlanta Business RadioX spotlights “the city’s best businesses and the people who lead them.”   PYA is pleased to share that one of its own, Consulting Principal...
Read More

PYA’s Lori Foley Shared Insight in Live Radio Interview

Many Americans have a 401(k) retirement savings plan as a benefit of employment with their employers.  They contribute a percentage of their compensation to their 401(k) each pay period with...
Read More

Taking Distributions from Your 401(k): What You Need to Know

The recent Tax Cuts and Jobs Act (TCJA) imposes a limit on deductions for business interest for taxable years beginning in 2018.  The limit, like other aspects of the law,...
Read More

IRS Sheds Light on New Limit on Business Interest Expense Deductions

Stakeholders seeking clarity were behind the latest Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB).  In response to questions raised, the FASB released ASU 2018-03: Technical...
Read More

Measuring Fair Value: New ASU Offers Clarity

The Tax Cuts and Jobs Act (TCJA) of 2017 brings sweeping changes for many businesses. Along with a reduced corporate tax rate and the elimination of the Alternative Minimum Tax...
Read More

Looking Ahead: Net Operating Loss Rules under the New Tax Act

Are you feeling unease about the impending Tuesday, April 17 tax filing deadline? Fear not –the Internal Revenue Service (IRS) permits a taxpayer to file an extension to allow time...
Read More

The Tax Deadline Looms: Need More Time?

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

* indicates required
Monthly eNewsletters
See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop