With hurricanes, floods, wildfires, earthquakes and other natural disasters affecting so many people throughout the United States every year, many are wondering what comes after the clean up.
First, you have to deal with the insurance companies. Then you need to look at what federal tax relief assistance programs might be available.
If you find yourself in the middle of a major disaster area, you generally have two options. You can file an amended tax return and claim the damages on your prior federal tax form. That will probably net you a refund. Moreover, it gets money into your hands sooner. Or you have the option of waiting until next tax season to file a casualty claim.
However, the Internal Revenue Service (IRS) generally offers other tax relief options as well, such as tax-free assistance from programs like FEMA and extended tax-filing deadlines. Additionally, there is the Mortgage Forgiveness Debt Relief Act of 2007 that protects homeowners from higher taxes when they refinance their homes.
Though the Act isn’t for the exclusive use of families in disaster areas, it does provide additional tax relief for those already under great duress. It acts to protect you from higher taxes when you refinance your home. Available through 2012, the law creates a temporary change to the tax code by eliminating taxes you may face if your lender forgives a portion of your outstanding mortgage debt.