With wildfire season just behind us and hurricane season upon us, many taxpayers may be wondering if their taxes will be affected by natural disasters. As your clients’ trusted advisor, you can help them understand how they may be impacted, and you can use this information to help educate them.
The Tax Cuts and Jobs Act has made some changes to how disasters may affect your clients’ itemized deductions. If your client is in a federally-declared disaster, nothing changes, and they may still get the itemized deduction. However, if your client is in a non-federally-declared disaster, the itemized deduction goes away.
It’s important to note, if your clients have gains from insurance proceeds, they can still offset disaster loss.
You and your clients can find the latest updates regarding federally-declared disasters from FEMA.
Editor’s note: Read tips from the IRS about preparing for natural disasters. This article was originally published on Sept. 17, 2018, and updated on Oct. 18, 2018, to reflect updates after Hurricane Michael.