Major storms and other natural disasters over the past few years--such as the wildfires in California and Hurricane Florence this year, and Hurricanes Harvey, Irma, and Maria in 2017--have caused significant property damage in many states. Federal tax provisions may offer relief to taxpayers affected by these disasters.
For example, federal income tax law allows a casualty loss for partial destruction of property, favorably modifies the rules for involuntary conversions resulting from certain disasters, allows certain disaster losses to be claimed in the preceding tax year, and provides an enhanced deduction for charitable contributions of inventory used to assist disaster victims.
The IRS regularly provides relief to taxpayers in federally declared disaster areas by, for example, extending filing and payment deadlines and abating certain penalties. Information about the areas that have been declared disaster areas is available on the irs.gov disaster relief page, which may be accessed here.
This PwC Insight discusses several of these favorable provisions. Taxpayers also should watch for possible Congressional action on legislation providing additional disaster tax relief, including provisions relating to casualty losses, charitable giving, and retirement account withdrawals.
Taxpayers affected by Hurricane Florence and other disasters should be aware of the tax relief that may be available to help alleviate the economic burden of the disaster. Careful planning is necessary to report accurately losses, recoveries, reinvestments, and charitable contributions of inventory and to take advantage of available tax benefits.