Why the possible new disaster relief legislation could mean more money in your wallet
This week Congress may finally pass disaster tax relief legislation. It's included in the 2020 government spending bill that just passed the House of Representatives.
"It has been done every year since Katrina until 2018. It's shameful that we took over a year to pass this," said Congressman Neal Dunn.
If the bill is passed, people with a casualty loss to their homes or businesses are likely to see a tax deduction.
Ann Marie Sale, a CPA at Carr, Riggs & Ingram, LLC, said, "so without this legislation, a $10,000 loss would have been zero. With this legislation, a $10,000 loss would be fully deductible because the legislation allows you to not limit your loss by ten percent of your income and it also allows you to add it to your standard deduction."
Sale said you don't have to itemize and are not subject to a cap based on your income to get the deduction benefit.
Dunn said the bill also allows people to put their own money to work. "What it does is allow withdrawal from IRA's and 401k's with no penalties and you can refill those afterward," he said. This would retroactively apply to the 2018 and include the 2019 and 2020 tax seasons.
Sale said the bill could also provide a six-digit benefit back to employers. "If an employer employed people after the storm and through the end of 2018 they're entitled to an employer retention credit and that credit is 40-percent of the first six-thousand of wages paid to employees if your business was impacted by the storm," she said.
While people like Sale and Dunn are thankful to see the tax relief finally gain traction, they only wish it happened sooner.
The bill is expected to be voted on in the Senate by the end of the week.
If you dipped into you're retirement savings in 2018 and are looking to amend your 2018 taxes, you may need to provide documentation to the IRS. Congressman Dunn's office says it's best to ask a professional tax expert to see exactly how this bill could impact your taxes.