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Tax Relief for Hurricane Harvey Losses

Posted by Admin Posted on Sept 14 2017

Tax Relief for Hurricane Harvey Losses

 

Hurricane Harvey took a devastating toll on Houston and its surrounding areas, many of our clients suffered damage to their homes and properties. As part of its relief package, the Internal Revenue Service has extended the filing deadline for those residing in Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria and Wharton counties until January 31, 2018. The extension to file your tax return does not apply to the payment of your tax liability. You are still responsible for having paid your liability by April 15, 2017 – penalties and interest will still be assessed from that date.

 

Included in the filing extension are the due dates for the 2017 3rd and 4th quarter estimated tax payments which are normally due September 15, 2017 and January 16, 2018 respectively. Taxpayers now have until January 31, 2018 to make those payments as well.

 

In addition to the filing deadline extension, the IRS offers taxpayers a deduction for losses attributable to the hurricane. This loss can be deducted on either your 2016 or 2017 tax return. Since the area is now a federally declared disaster area, if you have already filed your 2016 return, you can amend your return and claim the loss there. Claiming a disaster loss on the 2016 tax return may result in a lower tax for that year, often producing or increasing a cash refund.

 

To claim the loss on your tax return, you will need to supply us with the following information to be reported on your tax returns:

  1. Total cost of damaged property (property including home, furnishings, vehicles)
  2. Fair market value of property prior to disaster
  3. Fair market value of property after disaster
  4. Insurance reimbursement, if any.

 

For those of you that have suffered losses due to the hurricane, the IRS is also allowing hardship distributions or borrowings form 401(k) or 403(b) for eligible retirement plan participants. Plans will be allowed to make these distributions before they have been formally amended to do so. Please note, the current tax treatment of loans and distributions remains unchanged. Ordinarily, retirement plan loan proceeds are tax-free if they are repaid over a period of five years or less and hardship distributions are general taxable and subject to a 10% early withdrawal penalty.

 

We at Moore & Botzong are here to assist you in the recovery process by making your tax filing burden easier. We hope that any losses you may have suffered, if any, were not too substantial. We are here to answer any questions you might have regarding the best course of action for you to take regarding your tax situation, the hurricane losses and look forward to hearing from you.