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2017 Disaster Tax Relief Bill – Part II

Congress has recently passed and the President has signed the “Disaster Tax Relief and Airport and Airway Extension Act of 2017”. While the name may be long and confusing, this new bill has several tax provisions for the victims of Hurricanes Harvey, Irma, and Maria that are of interest.

Employee Retention Tax Credit

The Act provides a new credit for “eligible employers” affected by Hurricanes Harvey, Irma, and Maria. “Eligible employers” are defined as taxpayers who
1) conducted an active trade or business in a disaster area at the time each hurricane made landfall,
2) were unable to operate their business on any day between the hurricane landing and January 1, 2018, and
3) paid wages to their employees for any day the business was not able to operate.

The credit is equal to 40% of wages paid to employees while inoperable, with a maximum credit of $2,400 per employee. An employee can only be taken into consideration one time and cannot qualify for more than one of the hurricanes mentioned in the relief – Harvey, Irma, and Maria.

Earned Income Tax Credit & Child Tax Credit

Taxpayers that qualified for the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) in 2016 and were affected by Hurricanes Harvey, Irma, or Maria are also being given special rules related to being eligible for the same tax credits for 2017.

”Qualified Individuals” had their principal residence located in a disaster zone and must have been displaced from their principal residence by reason of one of these Hurricanes. If their earned income for calculating the EITC and CTC in 2017 is lower than the earned income calculated in the previous year, they may substitute the previous year’s amount when calculating these credits for filing their 2017 returns.

This Act has a lot of information to digest and will be applicable to many businesses and individuals affected by the hurricanes in 2017. As always, if you have any questions or would like additional information, please contact our office to schedule a consultation.

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