Hurricane tax relief (10-05-17)

On October 2, 2017, the President signed H.R. 3823, the Disaster Relief and Airport and Airway Extension Act of 2017, which provides temporary tax relief for victims of hurricanes Harvey, Irma, and Maria. The following is a brief overview of some of the provisions of this Act.

  • Casualty losses: Affected taxpayers can calculate their deduction without regard to the 10% floor. Also, taxpayers aren’t required to itemize to take a casualty loss.
  • Withdrawals from IRAs and retirement plans: Taxpayers located in the disaster areas may withdraw up to $100,000 from IRAs and qualified retirement plans as qualified hurricane distributions. The 10% penalty doesn’t apply, the distribution is included in income ratable over three years (by election), and withdrawals can be recontributed within three years.
  • Loans from retirement plans: For qualified taxpayers, the limit on loans from qualified retirement plans is increased to $100,000 and the first loan repayment is delayed for one year.
  • Charitable contributions: Contributions made between August 23, 2017, and December 31, 2017, for Harvey, Irma, or Maria relief efforts are not subject to the 50%, 30%, and 20% of AGI limitations under IRC ยง170(b). Note that hurricane contributions must be in cash. For taxpayers that do not itemize their deductions, the contributions can still be deducted in full in addition to their standard deduction.
  • Credits:
    • Employers in hurricane Harvey, Irma, or Maria disaster areas will be eligible for a new employee retention credit that equals 40% of the qualified wages for each eligible employee, up to the first $6,000 of wages.
    • For taxpayers in the hurricane areas, if their earned income for 2017 is less than their earned income for 2016, they may elect to use their earned income for the 2016 tax year for purposes of calculating the Earned Income Credit and the Child Tax Credit.

California does not conform to any of the provisions of the Disaster Relief Act. However, any distributions or loans made from a qualified plan under the Act will not disqualify that plan for California purposes.


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