Public Law 118-148 – Federal Disaster Tax Relief Act of 2023
Enactment Date: December 19, 2024
Summary:
The Federal Disaster Tax Relief Act of 2023 provides various tax relief measures to individuals and businesses impacted by federally declared disasters. The act aims to alleviate the financial burden and support recovery efforts in disaster-stricken areas.
Key Provisions:
Individual Tax Relief:
- Deduction Increase for Disaster Losses: Increases the deduction limit for unreimbursed losses from a federally declared disaster from $100,000 to $500,000 for individuals and from $200,000 to $1,000,000 for married couples filing jointly.
- Tax-Free Withdrawals from Retirement Accounts: Allows individuals affected by a disaster to make tax-free withdrawals of up to $20,000 from their retirement accounts without incurring the usual 10% early withdrawal penalty.
- Extension of Filing Deadlines: Extends tax filing deadlines for disaster victims by up to 180 days.
- Waived Penalties for Late Payments: Waives penalties for late payment of taxes for disaster victims.
Business Tax Relief:
- Deduction for Emergency Clean-Up Expenses: Allows businesses to deduct the costs of emergency clean-up and repair expenses from their taxable income, even if they do not expect to receive reimbursement from insurance.
- Accelerated Depreciation for Disaster-Damaged Property: Allows businesses to accelerate the depreciation of their property damaged or destroyed by a disaster, significantly reducing their tax burden in the year the damage occurs.
- Carryback Net Operating Losses: Permits businesses to carry back net operating losses incurred in a disaster year to previous tax years, resulting in tax refunds or reduced tax liability.
Other Provisions:
- Disaster Relief Fund: Establishes a new fund at the Internal Revenue Service (IRS) to provide grants to low-income taxpayers facing severe financial hardship due to a disaster.
- Simplified Tax Return Option: Offers a simplified tax return option for disaster victims to make filing their taxes easier.
- Increased Education and Outreach: Directs the IRS to provide increased education and outreach to disaster victims regarding their tax obligations and available relief options.
Significance:
The Federal Disaster Tax Relief Act of 2023 provides significant financial assistance and support to individuals and businesses affected by natural disasters. It aims to ease the tax burden, accelerate recovery efforts, and promote economic resilience in disaster-stricken areas. By offering tax deductions, exemptions, and other relief measures, the act helps alleviate the financial strain caused by catastrophic events and supports the rebuilding and recovery process.
Public Law 118 – 148 – Federal Disaster Tax Relief Act of 2023
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