The Disaster Tax Relief and Airport and Airway Extension Act of 2017 that was signed into law on September 29, 2017 included the following tax provisions that provide relief for taxpayers affected by Hurricane 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% of Adjusted Gross Income (AGI) 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 (EITC) and Child Tax Credit (CTC)
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 retirement account free of the 10% early withdrawal penalty and can spread the taxable portion on that distribution over a three year period.
- Allows for any qualified hurricane relief withdrawal will not be taxable if it is recontributed 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 contstruction of a principal residence due to eligible disasters.
Charitable Contributions for Hurricane Relief
Suspends the limiation on charitable contributions associated with hurricane relief that are made between August 23, 2017 and December 31, 2017.