There are only three certainties in life: death, taxes, and natural disasters.
Seriously. There may not be a single state in the U.S. that remains unaffected by Mother Nature year-round. From hurricanes in the Southeast to earthquakes and forest fires on the West Coast, landslides in the Pacific Northwest and tornadoes in the Midwest, every region is impacted by severe weather-related hardship.
In 2018 alone, the U.S. has been pummeled by multiple damaging hurricanes and historic wildfires, which have decimated communities and produced billions of dollars in damage.
When disasters strike, the last thing you may be thinking about is the financial loss you’ve incurred. However, it’s important to note that the IRS offers various methods of support for those experiencing hardship due to natural disasters.
As the hurricane season winds down and California continues to battle historic wildfires, we want to offer you a primer for the kinds support the IRS offers. While we hope your life remains unaffected by these tragedies, here are some tips and benefits to keep in mind should disaster strike.
If your property suffers damage from a natural disaster, you can most likely deduct some of that loss. There’s a lot of complexity in the details, but don’t worry—we’re going to break it down for you.
This deduction can be hugely helpful when you’ve experienced a loss from a natural disaster. Here’s how to break down the math:
Not everything applies to your casualty loss in the eyes of the IRS. Loss of future income or profits, for example, don’t factor in. So if you have an income-producing investment property, you can’t add the two months of anticipated lost income to your $4,900 total.
However, there are a few exceptions, as well as other difference between personal use and business property. The IRS dives into more of the details on their website.
In the past, the IRS has offered victims of natural disasters a host of other benefits, and they’ll typically announce them on their website. You may be able to take advantage of educational credits, speeding up of the Earned Income Tax Credit, and waived penalties for early IRA withdrawals.
Deductions aren’t the only benefits the IRS offers following a natural disaster. Here are the tax filing advantages you may be able to access, too.
Most taxpayers find it trying enough to file taxes in the first place. Following a disaster, however, meeting a tax deadline for filing and making installment tax payments can become near-Herculean tasks.
Historically, the IRS responds to natural disasters by offering extensions and postponing certain deadlines for both personal filers as well as business owners. If you keep your financial records within the declared disaster zone, you’ll likely get the same extensions—even if you don’t live in the affected area!
Keeping a detailed record of everything relating to your assets, losses, and insurance is especially critical when filing. Regularly working with an accountant or tax professional can help, but the IRS also supports your efforts by waiving its usual fee for copies of past returns.
When disaster strikes, financial relief simply can’t come soon enough.
To help you get the assistance you need, the IRS allows you to deduct a portion of your losses from a federally declared disaster on your most recent tax return—but you don’t have to wait! Once you have a firm grasp on your losses, you can file an amendment to your tax return. This gets the refund process started much sooner and get you the money you need faster.
(Heads up: This element of the loss deduction benefit can be a bit tricky for a first timer. Consulting with a tax professional can really help you get the most benefit.)
If you haven’t been directly affected by a natural disaster, there are still ways to help.
In the wake of disaster, finances are just one portion of the potentially immense losses. Unfortunately, as hundreds of thousands learn each year, the financial losses associated with a natural disaster often add another difficult obstacle to the recovery process.
If you’ve found yourself the victim of a storm, fire, or earthquake, we’re here for you. And so is the IRS. Hopefully, with this information at hand, you can recoup some of your losses and begin to look ahead at the future.