Congress has provided some tax relief to counties in Florida which were declared disaster areas by FEMA under the 2017 Disaster Tax Relief Act. Below we provide some provisions that may be of benefit to you. As with any tax rule or legislation, the devil is always in the details. Before you consider taking advantage of the benefits below we urge you to contact your WSB tax advisor in order to review your specific situation to make sure you qualify for the tax benefits.
The Disaster Tax Relief Act provides eligible employers with an employee retention tax credit equal to 40% of qualified wages of up to $6,000 paid to each eligible employee, resulting in a credit of up to $2,400 per employee.
An eligible employer is, generally, one that on September 4, 2017 conducted an active trade or business in the Hurricane Irma disaster zone (the portion of the disaster area that was hardest hit and is eligible for more non-tax federal assistance than is the disaster area generally) and whose business was made inoperable by the hurricane on any day after Sept. 4, 2017 and before Jan. 1, 2018 (the 2017 post-hurricane period). We can work with you to determine if your business qualifies as an eligible employer.
Qualified wages are, generally, wages paid or incurred to an eligible employee during the 2017 post-hurricane period, and after the trade or business became inoperable and before significant operations resumed. Wages qualify for the credit whether or not the employee performs any services, performs services at a place other than the principal place of employment, or performs services before significant operations have resumed.
An eligible employee is generally an employee whose principal place of employment was with the employer in the Hurricane Irma disaster zone on September 4, 2017.
The Disaster Tax Relief Act helps taxpayers that suffer a “net disaster loss” (qualified disaster-related personal casualty losses) in a number of ways. To qualify, the casualty losses must arise in the Hurricane Irma disaster area on or after Sept. 4, 2017, and be attributable to the hurricane.
In order to determine the amount of deductible loss, the 10% Adjusted Gross Income limitation removed. The personal casualty losses of taxpayers claiming a net disaster loss from Hurricane Irma don’t have to exceed 10% of adjusted gross income (the usual limitation) to qualify for a deduction. To most taxpayers this is a significant benefit that will allow the first dollar of loss to be deductible without the usual limits.
Note that this benefit generally applies to taxpayers who itemize their deductions. However, under the Disaster Tax Relief Act taxpayers with net disaster losses won’t have to itemize (as they would under the usual rules) to get tax relief. Instead, under a special rule, they can increase their standard deduction by the amount of their net disaster loss. Also, those who take the standard deduction and are subject to alternative minimum tax (AMT) (which generally disallows the standard deduction) won’t lose the part of it that’s attributable to the net disaster loss when figuring their AMT.
Should you have any questions please feel free to contact your Withum Tax Advisor.
|Peter A. Hilera, CPA, Partner