Senate Democrats have introduced a bill to provide tax relief to those affected by the wildfires in the West and the hurricanes in the South. For those who missed it, we covered this on our latest episode of This Week This Morning. Those who have suffered property losses, and are in a disaster zone identified by FEMA, could qualify for:
- An exception to the 10% penalty for early withdrawals from retirement plans (IRA, 401K, 403b, etc.). Further, the income tax due on these withdrawals would be due in even installment over a 3-year period. This would likely provide tax relief for 2020 – 2022. Any amounts you distribute from retirement accounts can be re-contributed in later years on top of your normal contributions.
- A 40% tax credit for up to $6,000 of wages per employee. The employer must be disaster-affected and the employee must be in a qualified disaster zone.
- There would be no 10% of AGI limitation on the deductibility of losses on Schedule A. Stated differently, if you itemize, your entire loss (net of insurance proceeds) would be deductible.
- Taxpayers could choose to use 2019 earned income for purposes of claiming the Earned Income Tax Credit and Child Tax Credit for tax year 2020.
Regardless of whether this tax relief, the IRS stated on Thursday that it will provide tax relief to victims of the Oregon wildfires. The list of disasters included will likely expand. The relief includes extending payment and filing dates to January 15, 2021 that would have otherwise been due after September 6, 2020.
Keep an eye on whether your residence is in a FEMA-declared disaster zone by clicking here. If you’re not there yet, check back again as this is a developing situation.
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