Millions of survivors of natural disasters will get much-needed tax breaks on compensation, but it’s only a drop in the bucket.
The Federal Disaster Tax Relief Act brings tax relief to victims of certain federally declared natural disasters and wildfires. Recently signed into law by President Biden, the new law allows those victims to claim qualified disaster-related losses without having to itemize deductions and eliminates the 10% adjusted gross income limit for claimants.
Additionally, the legislation makes compensation from settlements for disaster victims tax-free. The new tax relief package will help victims of recent hurricanes Helene and Milton and severe storms that have devastated areas of Alaska, Connecticut, Louisiana, Virginia, Pennsylvania, and Illinois.
Californians impacted by wildfires, survivors of the East Palestine, Ohio train derailment, and anyone impacted by disasters declared up to 60 days after the law’s enactment, will also get tax relief.
The development follows calls from various government agencies and congressional leaders highlighting the need to replenish key disaster response programs, as noted in a White House memo.
While tax breaks should help victims receive slightly more compensation, FEMA and the Small Business Administration (SBA) have expressed that their funding to support disaster victims is running low or already exhausted.
Separately, Congress is aiming to secure around $100 billion in funding via a year-end stopgap deal targeting natural disasters.
Here’s what survivors of federally declared disasters can expect under the new tax relief law.
Read the full article: https://www.kiplinger.com/taxes/new-law-delivers-tax-relief-to-natural-disaster-victims