Tax Planning for Retirees

Hurricane Disaster Tax Relief for IRAs and Qualified Plans

The Natural Disasters Targeted and the Types of Relief Provided. – Starting with the Gulf Opportunity Zone Act of 2005, Congress has over the years provided tax relief of various kinds to victims of natural disasters. The relief has not been identical for all such disasters, but has generally included several if not all of the following:

1. Elimination of mandatory withholding on withdrawals from IRAs and qualified plans.

2. Elimination of the penalty for early withdrawals from IRAs and qualified plans.

3. Taxation of the withdrawals over a three-year period.

4. A three-year period in which to roll over the distributions to an IRA or qualified plan.

5. An increase in loan limits and a longer repayment period for loans from qualified plans.

6. For hurricane victims, a longer period to roll over funds originally withdrawn to acquire a residence.

The relevant disasters are (1) the 2005 Hurricanes Katrina, Rita, and Wilma (IRC § 1400Q(a); 2005-2 C.B. 1165, Notice 2005-92); (2) the 2008 Midwestern area storms, tornados, and flooding (IRC § 1400Q(c), as modified by the Heartland Disaster Tax Relief Act, Pub. L. No. 110-343, § 702); (3) the 2017 Hurricanes Harvey, Irma, and Maria (Disaster Tax Relief and Airport and Airway Extension Act of 2017, Pub. L. No: 115-63, § 502); (4) the year 2016 disasters (Tax Cuts and Jobs Act, Pub. L. No. 115-97, § 11028.); (5) the 2017 California wildfires (Bipartisan Budget Act of 2018, H.R. 1892, §§ 20101, 20202.); (6) the qualified disaster areas declared during the period from January 1, 2018 to December 20, 2019 (Taxpayer Certainty and Disaster Tax Relief Act of 2019, Pub. L. No. 116-94, H.R. 1865, §§ 201-208.), and (7) the 2020 coronavirus pandemic (The CARES Act of 2020, S. 3548, § 2103.) See Chapters 2 and 5 of the treatise.