When disaster strikes, the last thing on your mind is how it will impact your taxes. Disasters are, by nature, unpredictable, intense, and often devastating. They can very quickly upend your life and plans. When the storm, fire, or other natural occurrence has passed, and you are sifting through your life, you might begin to consider the financial strain this will add. How will it impact your taxes? Is there IRS disaster relief?
Whether you’ve recently been through a disaster or want to prepare for the worst, we’ve looked into how the IRS handles these distressing events.
Relief for wildfires
Wildfires have been responsible for about $5.1 billion in the last ten years alone. Widespread, devastating fires like the ones that burned California in 2018 often qualify for IRS tax relief. Sometimes, this relief includes tax extensions or specific covered regions, known as “California wildfire disaster zones.”
The Disaster Resource Guide offers advice for victims of disasters like wildfires. Tips include:
- Taking photos and videos of the damage
- Contacting the title company or bank for appropriate home documents
- Getting the current property tax statement for land and
- Reviewing insurance policies
Relief for hurricane and storm victims
Despite their innocuous names, hurricanes are violent, tropical storms that leave devastation in their wake. This year alone, thirteen storms and five hurricanes were predicted to make landfall—a number surprisingly below average. So far, there have already been twelve, including Subtropical Storm Andrea, Hurricane Barry, Tropical Storm Chantal, and Hurricane Dorian.
Leading up to Dorian, the IRS released a video about preparing for disasters. They also offered resources such as tips on reconstructing records after a natural disaster. Especially if you need federal assistance or insurance reimbursement. The Disaster Resource Guide details how individuals or businesses “may be able to deduct the loss or partial loss of personal and business use property” the year of the loss.
Certain storms even lead to special tax relief. Such as the Gulf Opportunity Zone Act of 2005 and the Katrina Emergency Tax Relief Act of 2005.
An IRS publication from September 2019 explained relief for farmers in Washington “who were forced to sell livestock due to drought.” These farmers had an additional year to replace their livestock and defer taxes on “any gains from the forced sales.”
The document outlines that the National Drought Mitigation Center determines those areas impacted by their U.S Drought Monitor maps. The drought circumstance is an excellent example of how the IRS provides relief for those whose livelihood is affected by a natural disaster.
What about other disasters?
For other disasters, the IRS lists programs and resources for individuals that can help them prepare or recover. These include disasterassistance.gov, GovBenefits.gov, Small Business Administration, and READY.gov.
You’re more covered than you think.
Whether you have been through a disaster or are preparing for the future, the team at C&D is here to help you navigate tax relief following one of these traumatic events.