Tax relief available for damage from federally declared disasters
September 2020
Overview
Major storms and other natural disasters cause significant property damage each year. Taxpayers affected by these disasters may be eligible for certain tax relief. For example, federal tax provisions allow a casualty loss deduction for partial destruction of property, favorably modify the rules for involuntary conversions resulting from certain disasters, allow certain disaster losses to be claimed in the preceding tax year, and provide an enhanced deduction for charitable contributions of inventory used to assist disaster victims. Taxpayers affected by federally declared disasters should note whether their area is declared a federal disaster area and be aware of the tax relief that may be available to help alleviate the economic burden of the disaster.
The takeaway
Taxpayers affected by hurricanes, floods, tornadoes, wildfires, or other federally declared disasters should note whether their area is declared a federal disaster area and 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 losses, recoveries, reinvestments, and charitable contributions of inventory accurately and to take advantage of available tax benefits.
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