Hurricane Florence victims get a break on taxes
- Quarterly income payments were due on Sept. 17, but the IRS has pushed that back to Jan. 31, 2019.
- If you had already an extension until Oct. 15 to turn in your 2017 taxes, the IRS will also give you more time to file.
- Meanwhile, the rules for deducting casualty losses on your taxes have changed in 2018.
The IRS will grant some tax relief to residents who are reeling from Hurricane Florence.
The storm, which weakened to a tropical depression on Sunday, poured up to 40 inches of rain on North Carolina since Thursday.
President Donald Trump declared North Carolina and South Carolina a federal disaster area due to the hurricane.
Taxpayers affected by the storm will have additional time to file their quarterly estimated income taxes, which would have been due on Sept. 17. They will now have until Jan. 31, 2019 to file and pay the applicable levies for that period.
Further, if you had a valid extension to file your 2017 taxes by Oct. 15, the IRS will grant you additional time to file.
For now the postponement is available to residents in areas that are designated by the Federal Emergency Management Agency as qualifying for individual assistance.
Check here for details on qualifying for relief.
Here are other tax-planning implications for households affected.
Casualty loss deduction
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 and other events. The total of these losses need 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 of AGI threshold.
This change is in effect from 2018 through the end of 2025.
"If this were a storm over your house in New Jersey, you don't have this provision; where those affected by Florence in North Carolina likely will," said Craig Richards, a CPA and director of tax services at Fiduciary Trust Company International.
Limits on losses
Under most circumstances, in order to claim the casualty or theft loss, you must be claiming itemized deductions.
The new tax law roughly doubled the standard deduction to $12,000 for individuals and $24,000 for married couples filing jointly, so fewer people are expected to itemize in 2018.
When you're deducting losses related to a federally declared disaster, the rules are a little different.
In that case, the 10 percent of AGI limit doesn't apply. Filers affected by a federally declared disaster can also take the loss without having to itemize.
You should also be aware that how much you can claim as a loss will be reduced based on the insurance payout you receive for your damages.
If your losses are large enough that your deductions for the year exceed your income, you may have a net operating loss or NOL.
Individuals — not just businesses — may have an NOL from casualty and thefts.
You can use your net operating loss to reduce your tax in a previous year, which may result in a refund, according to Richards of Fiduciary Trust Company International.
Alternatively, you can use the loss to lower taxes in the future.
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