If your home has been damaged or your family has been displaced by a hurricane, taxes are probably the last thing on your mind – at least, until you see your filing deadline on the horizon. As you're figuring out how to declare your losses, you'll probably wonder: Can I get some kind of relief from this?
First, we should point out that, from the IRS' perspective, hurricane tax relief falls under the broader subject of natural disaster tax relief. When a natural disaster strikes, the IRS doesn't generally extend a blanket tax credit to victims. Instead, it may implement relief procedures to lower the tax burden on people who were affected by a storm, flood, hurricane or related event. While there's no one-size-fits-all tax relief plan for every natural disaster, there are a few things that the IRS generally offers to disaster victims to provide some assistance during a tough year.
One common form of tax relief won't affect your refund or how much you owe, but can give you more time to recover and sort through the damage before filing. The IRS often gives extensions to those impacted by a natural disaster, meaning that you can file your taxes later without a penalty. If you live or operate a business in a presidentially declared disaster area (or if you don't but were still genuinely affected by the disaster), you'll need to mark your Disaster Designation on the top of your return in red ink [source: IRS]. If you run a business that has employees, you'll also need to note the extension on form 5500, "Annual Return/Report of Employee Benefit Plan." The IRS has more detailed instructions on its page on presidentially declared disaster areas.
An extension can give you a bigger buffer between the disaster and the filing deadline, but you may also want to address the financial impact of your losses. If you're in a presidentially declared disaster area, you can generally take a casualty loss deduction. This only applies if your losses were not covered by insurance.
Bottom line? Hurricane tax relief is usually tailored to specific events, and both federal and state governments are going to decide appropriate tax aid on a case-by-case basis.