Hurricanes and Casualty Losses

Taxes have always been a way for federal, state, and local governments to raise the dollars needed to fund infrastructure, social programs, and international dealings.  In Colonial times, and before, when the need for taxes was not as intense as it is today, taxes were levied by individual states and then forwarded to the federal government on a sort of donation basis. Until relatively recently in U.S. tax history, federal programs were funded via excise taxes, tariffs, and customs duties.  And because the individual tax obligation was not federal, taxpayers were left to their own devices to recover from any natural or man-made catastrophe which affected their ability not only to pay taxes, but to survive.  But as taxes became a national necessity, it became obvious that, at least during times of economic hardship, there needed to be some sort of relief from the tax burden for affected individuals.  There comes a time when at least some taxpayers simply can’t meet the standard tax obligation.

The federal government realizes that the fiscally healthy taxpayer is best able to finance the continued health of the economy as a whole.  Since the early 1950’s tax cuts and economic recovery policies have been designed to keep taxpayers financially sound and funding the economy by spending money.  And as massive hurricanes, tornados, terrorism, and other catastrophic events toyed with the income of the average American, the federal government was under pressure to respond with policies which rendered relief for the taxpayer and incentive to relieve a burdened economy.

The IRS responded to personal and business losses caused by Hurricane Katrina by issuing tax credits and cuts to those most affected.  However, as Hurricane Ike and Gustav roared through the Gulf Coast of the United States, it became clear that more, and updated, tax policies were needed.  Taxpayers can now visit the IRS webpage Tax Relief in Disaster Situations to help with questions regarding how to protect their records, who to go to for help, and how to claim disaster-related losses on their taxes.  Disaster relief by state can be found at the IRS’s Around the Nation.

If you were affected by the recent hurricanes, we want to help.  Leave a comment below telling us about your situation, and let us know what tax questions you have.

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