Qualified Disaster Tax Relief

The Internal Revenue Service has announced tax relief for individuals and businesses affected by Hurricane Idalia in parts of Florida, Georgia, and South Carolina or the wildfires in Hawaii. Taxpayers affected by the storm that began in late August, now have until Feb. 15, 2024, to file various individual and business tax returns and make tax payments if they reside or have a business in a county identified by Federal Emergency Management Agency (FEMA) in a disaster declaration. Additionally, individuals and business affected by wildfires in Hawaii qualify for tax relief. In addition to receiving additional time to file, the IRS also allows for other relief such as casualty loss deduction, penalty forgiveness, and limited income exclusion.

Qualified Disaster Areas:

The following counties in Florida have been identified as impacted by a qualified disaster and qualify for tax relief. Alachua, Baker, Bay, Bradford, Calhoun, Charlotte, Citrus, Clay, Collier, Columbia, DeSoto, Dixie, Duval, Flagler, Franklin, Gadsden, Gilchrist, Gulf, Hamilton, Hardee, Hernando, Hillsborough, Jefferson, Lafayette, Lake, Lee, Leon, Levy, Liberty, Madison, Manatee, Marion, Nassau, Pasco, Pinellas, Polk, Putnam, Sarasota, Seminole, St. Johns, Sumter, Suwannee, Taylor, Union, Volusia and Wakulla counties. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 27, 2023, and before Feb. 15, 2024, are granted additional time to file.

The following counties in Georgia have been identified as impacted by a qualified disaster and qualify for tax relief. Appling, Atkinson, Bacon, Berrien, Brantley, Brooks, Bulloch, Camden, Candler, Charlton, Clinch, Coffee, Colquitt, Cook, Echols, Emanuel, Glynn, Jeff Davis, Jenkins, Lanier, Lowndes, Pierce, Screven, Tattnall, Thomas, Tift, Ware, and Wayne counties. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 30, 2023, and before Feb. 15, 2024, are granted additional time to file.

All 46 counties in South Carolina have been identified as impacted by a qualified disaster and qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 29, 2023, and before Feb. 15, 2024, are granted additional time to file.

The counties of Maui and Hawaii in Hawaii have been identified as impacted by a qualified disaster and qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 8, 2023, and before Feb. 15, 2024, are granted additional time to file.

Affected Taxpayers:

Taxpayers considered to be “affected taxpayers” eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers include individuals who live, and businesses (including tax-exempt organizations) whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Additional Tax Relief:

Casualty Losses Affected taxpayers who suffered from uninsured or unreimbursed disaster-related losses are entitled to a casualty loss deduction. These losses can be claimed on the tax return in either the year the loss occurred or the prior years return. Currently, casualty losses are subject to a floor of 10% of AGI before being eligible for deduction, but lawmakers continue to introduce bills to provide special tax treatment in the event of qualified disasters to eliminate this floor. HBK continues to monitor these developments and will provide additional guidance upon legislative change.

Penalty Forgiveness

Affected taxpayers who need to make an early withdraw from their retirement accounts may be eligible for a special disaster distribution that would not be subject to the additional 10% early distribution penalty. These distributions are also eligible to be spread over a three year period to spread the tax liability. Each plan or IRA has specific rules and guidance for their participants to follow, that need to be followed in order to qualify.

Income Exclusion

Affected taxpayers that receive qualified disaster relief payments from a governmental agency are generally permitted to exclude these payments from income. These payments are required to be used from reasonable and necessary personal, family, living, or funeral expenses, as well as the repair of a home including repair or replacement of its contents.

If you have been impacted by any of these disasters, please reach out to your HBK representative.