10 tax questions asked during a disaster
BATON ROUGE – The Louisiana Department of Revenue has compiled a list of the ten most frequently asked tax questions on disaster recovery.
Here they are:
· Money donated to a GoFundMe or other crowdfunding website to benefit flood victims is it tax deductible? Or do I owe taxes on the money I donated?
Answer: The donation may be deductible if the beneficiary is a qualified organization like a nonprofit charity, educational, religious or other that has a tax exempt status by the IRS. Make sure you keep documentation of the contribution for tax purposes. If the donation is for the benefit on an individual or nonqualified organization it will not be deductible. Generally you will not owe additional taxes on donations which benefit others.
· Is money from a GoFundMe or other crowdfunding website taxable if it assists me with disaster related expenses like temporary housing or home repairs?
Answer: Generally speaking no. Individuals do not owe federal or state income tax on the value of property acquired by gift or donation. However, the IRS has not issued any specific guidance on the receipt of money from crowdfunding websites.
· Is volunteering to assist with rescue efforts or shelters deductible for tax purposes? Or any out of pocket expenses volunteering deductible?
Answer: You can’t claim a deduction volunteering, but you may be able to deduct any out of pocket expenses if those expenses are not reimbursed to you while you are working for a certified charitable organization.
· Is providing living space and meals to a displaced family tax deductible? What about the additional cost of electricity or food?
· Can you receive a tax deduction for donating food, clothes, household goods or other similar items?
Answer: You can deduct the value if the items are donated to a qualified organization, such as a church or a nonprofit. Clothing or household items need to be in good condition.
· What records should be keep to substantiate a charitable deduction?
Answer: It depends if you donate cash, noncash or out of pocket expenses. Refer to IRS publication 526 for a detailed listing. It always is wise to keep any documentation and receipts of the donation.
· Home is flooded but owner has no flood insurance, can the loss be claimed as a deduction?
Answer: You can deduct casualty and theft losses related to your home, household items and vehicles that are damaged or destroyed. You cannot deduct casualty or theft losses covered by insurance unless you have a timely filed claim for reimbursement. In that case you reduce the loss by the amount of the reimbursement from the insurance company.
· Are mitigated payments taxable?
Answer: No. These payments include the amounts paid under the Robert T. Stafford Disaster Relief and Emergency Assistance Act and National Flood Insurance Act.
· Are payments through FEMA’s “Individual and Household Program” taxable?
Answer: FEMA IHP payments are generally not considered income and are not taxable.
· Is a FEMA or insurance payment which exceeds my adjusted basis in my home or other property taxable?
Answer: It could be. But it would be for the excess amount. If you received benefits related to a house of $250,000, and the adjusted basis for the home is $220,000 you may owe income taxes on the $30,000.
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