The Disaster Tax Relief and Airport and Airway Extension Act of 2017 was signed into law on September 29, 2017. Highlights of the tax provisions providing relief for taxpayers affected by Hurricanes Harvey, Irma and Maria for 2017 federal tax returns:
Deduction for Personal Casualty Losses
Uncompensated losses in an applicable hurricane disaster area:
- Must exceed $500 in order to take a deduction
- Do not have to exceed 10 percent of Adjusted Gross Income to qualify for deduction.
- May be taken as an itemized deduction or as an increase in a taxpayer’s standard deduction.
Special Rule for Determining 2017 Earned Income for the Earned Income Tax Credit and Child Tax Credit
Qualified individuals may use their earned income from 2016 to determine their earned income tax credit and their child tax credit for their 2017 federal income tax return.
Qualified individuals are those whose principal place of abode was located in the Hurricane Harvey, Irma or Maria disaster zone on the date of each applicable hurricane and the individual was displaced from their home because of the hurricane.
Penalty-Free Access to Retirement Funds
- For qualified hurricane relief an individual can withdrawal funds from a retirement account free of the 10 percent early withdrawal penalty and can spread the taxable portion on that distribution over a three year period.
- Any qualified hurricane relief withdrawal will not be taxable if it is re-contributed within three years of the date of distribution.
- Increases the maximum loan amount for qualified hurricane relief to $100,000.
- Allows for re-contribution of retirement plan withdrawals for cancelled home purchases or construction of a principal residence due to eligible disasters.
Charitable Contributions for Hurricane Relief
Suspends the limitation on charitable contributions associated with hurricane relief that are made between August 23, 2017, and December 31, 2017.
Provides qualifying businesses a tax credit for 40 percent of wages (up to $6,000 per employee) paid by a disaster affected employer to an employee from a core disaster area.