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Harvey Tax Relief Information

Hurricane Harvey Relief

Residents and businesses in the federally declared disaster area affected by Hurricane Harvey that have suffered a loss may be allowed to deduct certain losses.

If in the year of the casualty (a sudden, unexpected or unusual event) a portion of the loss is not covered by a claim for reimbursement, or grant provided by FEMA, then such portion of the loss may be deductible.

Federally Declared Disaster

Hurricanes Harvey, Irma and Maria were declared “Federally Declared Disasters” by President Trump, which provides several temporary tax benefits to individuals. (H.R. 3823)

  • Elimination of the 10% AGI threshold
  • Increase of the standard $100 reduction to $500
  • Elimination of the requirement to itemize which allows a net disaster loss to be added to a standard deduction.
  • Exception to the 10% early retirement plan withdrawal penalty for qualified hurricane relief distributions that do not exceed $100,000, the maximum qualified hurricane distribution.
    • This distribution may be repaid to plan over a 3-year period,
    • Or, be included in gross income ratable over the 3-taxable-year period.

The net disaster loss may be taken on your 2017 individual tax return, the year in which the disaster occurred, or it may be carried back to 2016 by amending your 2016 individual return.

Proving the Loss

To deduct a casualty loss, you must be able to show that there was a casualty. You also must be able to support the amount you take as a deduction.

You should be able to show all of the following:

  • That the loss was a direct result of the casualty.
  • That you were the owner of the property, or if you leased the property from someone else, that you were contractually liable to the owner for the damage.
  • Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery.
  • *Fair market value and adjusted basis before and after the loss.

Required Documentation

Please be prepared to provide the following documents required complete the forms

  • Description of the damaged property.
  • Adjusted cost basis of the damaged property – this is the cost of the property plus any improvements.  (This is not the same as replacement cost provided to the insurance carrier!)
  • *Fair market value of the damaged property before the loss.
  • *Fair market value of the damaged property after the loss.
  • Amount of insurance or FEMA grant proceeds.

*FMV should be provided by a certified appraisal of the property indicating value before and after the disaster.