North Carolina Residents may Benefit from Disaster Relief Tax Breaks
The storm has ended, the floodwaters have receded, and now you are left to clean up the mess that Hurricane Florence left in its wake. Hurricane Florence was the wettest tropical cyclone ever recorded in the Carolinas. Both North and South Carolina were declared federal disaster areas by the president. 53 people died. The storm surge and later flooding caused massive evacuations, power losses, and property damage estimated currently at over $44 billion dollars.[i] A destructive storm of this nature can leave the survivors feeling lost as they attempt to recover.
Where You Live
As residents salvage their homes, start itemizing and begin the hard journey of rebuilding, one reprieve will come from the IRS. Individuals residing in Beaufort, Bladen, Brunswick, Carteret, Columbus, Craven, Cumberland, Duplin, Greene, Harnett, Hoke, Hyde, Johnson, Lee, Lenoir, Jones, Moore, New Hanover, Onslow, Pamlico, Pender, Pitt, Richmond, Robeson, Sampson, Scotland, Wayne and Wilson counties may qualify for tax relief[ii].
Filing Postponement and Casualty Loss Deductions
Those eligible will be able to postpone deadlines and in some cases postpone filing or be granted additional time. The affected who qualify will also have the ability to declare disaster-related casualty losses on their income tax return for the year of the hurricane, or the year prior. [iii] There have been changes to how you can claim casualty loss deductions since the Tax Cuts and Jobs Act took effect. In the past, you could claim itemized deductions for property not reimbursed by your insurance. The total claimed losses needed to exceed 10% of your gross income. After the Tax Cuts and Jobs Act, these claims are only allowed if the event was declared a federal disaster. This change to casualty and theft deductions is in effect 2018 through 2025.[iv]
Federal Disaster Losses
The rules deducting losses related to a federally declared disaster have changed and may not need to be itemized. You will need to do research into how much your insurance will cover, and if your losses are larger than your yearly income, you may be filing as an NOL or net operating loss. NOL can be filed by an individual or a business. This NOL filing may result in a refund either in previous tax years or in future filings.
Waived Fees and Penalties
Affected taxpayers may benefit from the IRS waiving some fees and expediting copies of past returns. Make sure to write “North Carolina, Hurricane Florence” in red ink on top of Form 4506, which is a request for a copy of your tax returns, or form 4506-T which is a transcript of your returns. Relief for filers may also include a waiver for late-deposit penalties for federal payroll or excise tax deposits due in early September.[v]
Recovering from a natural disaster takes time. It is important to protect your assets and investments, take advantage of any tax breaks and extensions, also to take care of yourself during this challenging time. Like a Phoenix rising from the ashes, taking stock of what you have and not only what you lost can help. Surviving a natural disaster is traumatic in part because it affects us physically, financially and socially.[vi] The trauma of a hurricane like Florence can also cause PTSD. The best advice for managing after a storm is to be prepared in the future. Make sure to protect your home, your investments and re-evaluate your insurance policies. Life happens, good and bad, and the more prepared we are, the more ready we will be to weather the storms. So, research your tax options, take advantage of any postponements of waived fees and know the worst is behind you. Now is the time to rebuild and heal.
Contributing author Illuminated Advisors
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