On September 29, 2017, President Trump signed into law The Disaster Tax Relief and Airport and Airway Extension Act of 2017 (“the Act”). The Act provides a variety of additional tax relief measures to assist in the recovery from Hurricanes Harvey, Irma, and Maria. This includes the following:
Employee Retention Credit
The Act provides for a tax credit called the “Employee Retention Credit” or “ERC” to employers who continued to pay wages to their employees during a time when their business rendered inoperable by Hurricane Harvey, Irma, or Maria. The amount of the credit equates to 40% of qualified wages paid to employees employed at the location that was rendered inoperable, with a per-employee maximum credit of $2,400. Qualified wages include those amounts paid to employees from the date your business became inoperable to the date your business resumed significant operations. If your business was rendered inoperable for a period of time due to Hurricane Irma, then please document the down period and the wages paid to employees during that time.
Relaxed Casualty Loss Rules
The casualty loss rules explained in the prior disaster relief update have been eased. First, the requirement that the net disaster losses exceed 10% of adjusted gross income has been removed. Losses may be claimed and provide a tax benefit no matter what amount. Secondly, the Act now allows these losses to be taken, even if you do not itemize your deductions for the year. This allows for all individuals who suffered a net disaster loss to receive a tax benefit.
Qualified Hurricane Distributions from Retirement Plans
The Act provides an exception to the normal retirement distribution rules for Qualified Hurricane Distributions. Qualified Hurricane Distributions are distributions from any qualified retirement plan, including 401(k)s and IRAs, to an individual who lives in a disaster area and suffered a loss due to the hurricane. Under the Act, up to $100,000 may be distributed before January 1, 2019, without being subject to the 10% early withdrawal penalty. Similar to normal distributions, however, any traditional retirement plan distribution (i.e. Traditional IRA or 401(k)) will be taxable as income.
Charitable Deduction Limitations Lifted
Typically, the charitable donation deduction is limited to 50% of adjusted gross income. The Act, however, provides that donations to qualified hurricane relief charitable organizations will not be subject to these limitations. If you make a donation to one of these organizations, please make sure you receive a written acknowledgment from the organization stating that the donation is for the relief efforts.
As always, we will do our best to keep you up to date on any changes. If you have any questions, please contact our office.
