Tax Bill Ends Deductions for Natural Disasters
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What’s the story?
The Tax Cuts and Jobs Act eliminates the deduction for uninsured casualty losses from natural disasters, including wildfires, hurricanes, and floods.
Currently, businesses and individuals that experience natural disasters can deduct losses – not covered by insurance - that exceed 10 percent of their income.
Under the new tax plan, the deduction can only be claimed when the president declares a federal emergency.
What about the recent natural disasters?
Though the deduction would disappear next year, it would still be available for those affected by this summer’s hurricanes and the victims of the Northern California wildfires—"as long as they can figure out their uninsured losses and include them on their 2017 tax return," the Los Angeles Times explained.
California Rep. Mike Thompson, a Democrat representing Northern California, questioned the feasibility of that timetable.
"Do you really think that we’re going to be able to go in, assess all of the costs, get everything cleaned up, figure out where people are going to stand in time to do their taxes? It’s not going to happen."
What if a natural disaster isn’t declared?As NBC News explained, "if President Donald Trump or other future occupants of the Oval Office don’t come out and proclaim, ‘Disaster,’ then it doesn’t count come tax filing time."
Dave Jones, the California Insurance Commissioner, had rallied against the legislation for this reason. He noted that between 2000 and 2013, the Golden State made 16 major disaster declarations; the federal government denied five of them natural disaster status.
"The 2016 Erskine Fire, which destroyed 290 homes, killed two people, and was one of the most destructive in Kern County history, was not declared a federal disaster," Jones said in his statement. “Had the GOP tax bill been law in 2016, Erskine Fire victims would not have been able to deduct their uninsured losses.”
There’s also concern of the political leverage this tax provision gives a president. Joe Heider, president of Cirrus Wealth Management, told NBC that:
"You can make the argument that if a particular president wants to be very political in a state that his or her party does not favor, then they could not care if it’s a disaster, and not declare it one."
What if my house burns down from a grease fire?
"This is going to be a rude awakening for people who suffer losses that aren’t their fault and don’t necessarily fall into the FEMA bucket," Rep. Joe Courtney (D-CT) told the Hartford Courant.
These include people who suffer damage to their homes or property from kitchen fires, flooding caused by burst pipes, or mudslides caused by heavy rain.
"A grease pan lights up, igniting the house. That’s a disaster for one family, but it doesn’t merit a presidential declaration. No deduction," George Skelton wrote in an op-ed for the L.A. Times.
"Those guys would get the shaft," Rep. Thompson said. “They don’t get the public attention there is in a natural disaster.”
What do you think?
Do you support eliminating the natural disaster deduction? Should the deduction be tied into a president declaring a federal emergency? Hit Take Action and tell your reps, then share your comments below.
—Josh Herman
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(Photo Credit: clintspencer / iStockphoto)
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