On Sept. 29, 2017, the President signed into law the federal Disaster Tax Relief and Airport and Airway Extension Act. It provided relief for taxpayers affected by Hurricanes Harvey, Irma, and Maria that occurred in Texas, Florida, and Puerto Rico during the late summer of 2017.
This week, the Senate Tax Committee considered a bill that would capture those new federal tax breaks for Minnesota taxpayers who either made contributions toward hurricane-relief efforts or were personally affected by the hurricanes. The bipartisan bill would provide three main benefits:
- Allow victims up to a $100,000 penalty-free early retirement account withdrawal. Typically, early withdrawals from retirement accounts are subject to a 10% tax penalty. Under this bill, Minnesotans who incurred damages from the hurricanes could have the penalty waived as long as the withdrawn amount is either repaid or included in gross income over a three-year period.
- Allow victims to deduct all casualty losses. In 2017, casualty losses were only tax-deductible for taxpayers who itemize if they exceeded 10% of Adjusted Gross Income. This bill allows any Minnesotan who suffered a hurricane-related loss – regardless of whether they itemize – to deduct the entire amount of losses, without regard to the 10% threshold.
- Deduct all charitable contributions made toward relief efforts. The current limits on charitable contributions are suspended for qualified, hurricane-related donations made before December 31st, 2017.
Testimony during the hearing revealed many families have relocated to Minnesota after last year’s disaster, who could potentially benefit. The hundreds of Minnesotans and businesses that made contributions toward relief projects also would benefit from the update. The Tax Committee laid over the bill for possible inclusion in the omnibus bill. (SF 2523)