Personal Finance

Hurricane Michael victims will get a break on their taxes

Key Points
  • If you filed for an extension on your 2017 taxes, your Oct. 15 deadline is right around the corner.
  • As a general rule, the IRS grants extensions based on the Federal Emergency Management Agency’s declarations in the event of a disaster.
  • Filers affected by Hurricane Florence were given relief for quarterly income taxes and more. They have up to Jan. 31, 2019 to submit certain filings and make payments.
'Life-threatening flash floods' possible from Michael: National Hurricane Center

Taxpayers who were affected by Hurricane Michael will receive some tax relief, as the IRS granted them additional time to file.

On Friday, the IRS announced that affected residents who had an Oct. 15 extension deadline to file their 2017 tax returns will now have until Feb. 28, 2019 to submit their paperwork.

The IRS also pushed out filing and payment deadlines for affected taxpayers who would have been on the hook for quarterly estimated income tax payments on Jan. 15, 2019. Those individuals will now also have until Feb. 28, 2019 to make the necessary payments.

Click here for more information from the IRS.

Amid natural disasters, the IRS often grants tax relief to affected residents, based on the Federal Emergency Management Agency's declarations, said Eric Smith, an IRS spokesman.

"What we do is grant relief based on FEMA's assessments," said Smith. "The key thing to be aware of is whether it's going to affect the filing deadline."

Here's what you need to know.

Granting more time

A customer enters a boarded up gas station ahead of Hurricane Michael in Panama City Beach, Florida, U.S., on Tuesday, Oct. 9, 2018. Michael, a Category 2 hurricane, is racing toward the Florida panhandle and is forecast to become the second storm to make U.S. landfall in a month. 
Luke Sharrett | Bloomberg | Getty Images

Filers who were supposed to turn in their 2017 income tax returns by Oct. 15 will now get more time.

These taxpayers' 2017 levies were originally due on April 18 — even if they had received an extension to submit their returns — and any payments that haven't been made yet are accruing interest.

In September, the IRS granted relief to taxpayers affected by Hurricane Florence.

Residents affected by that storm with quarterly income tax payments due on Sept. 17 and Jan. 15, 2019, among others, have until Jan. 31, 2019 to file the applicable returns and pay taxes that were originally due during that period.

In this case, filers with the Oct. 15 extension were also given more time.

There are other tax planning implications to keep in mind, too.

Casualty loss break

Be aware that the Tax Cuts and Jobs Act, the tax overhaul that went into effect this year, has changed the way you can claim personal casualty and theft losses.

Prior to the change, you were able to claim an itemized deduction for property losses that aren't reimbursed by insurance and that stem from natural disasters, fires, thefts and other events. The total of these losses needed to exceed 10 percent of your adjusted gross income.

In 2016, the most recent year available, 154,274 tax returns claimed a casualty or theft loss deduction, according to data from the IRS.

Now, you may claim casualty losses on your taxes only in the event of a federally declared disaster.

You can either claim them during year they occurred — 2018 — or in an amended return for the prior year.

Your loss deduction is still subject to the 10 percent threshold.

This change is in effect from 2018 through the end of 2025.

Under both the old and new tax law, how much you can claim as a loss will be reduced based on the insurance payout you receive for your damages.

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