Tax-reform plan would eliminate deduction for wildfire losses
Tax-reform plans before Congress would limit or eliminate the natural-disaster deduction, meaning future victims of wildfires like the ones raging throughout Southern California could no longer deduct losses of property that is uninsured or under-insured.
The House and Senate proposals, which are in the process of being reconciled, would not affect natural-disaster deductions filed for the 2017 tax year.
Democrats have been most vocal in maintaining the natural-disaster deduction after this year. California Republicans in Congress also have expressed a desire to help victims of wildfires – but not necessarily by continuing existing provisions.
Rep. Mimi Walters, R-Laguna Beach, is sponsoring a bipartisan bill that would expand current tax relief for victims of the October wildfires. In addition to current deduction provisions, the measure would allow those with losses to make penalty-free withdrawals from retirement accounts. There is discussion of amending the bill to include victims of this week’s fires.
Responding to inquiries by the Southern California News Group, none of the GOP House members in Orange, Los Angeles, Riverside and San Bernardino counties explicitly called for the current disaster deductions to be continued – or eliminated. However, several indicated they could be open to maintaining the deductions.
“Congress must approve and provide tax relief to victims of the California wildfires,” said Rep. Ken Calvert, R-Corona, a co-sponsor of the Walters bill. “We could do this broadly in the larger tax package or in a more targeted manner as stand-alone legislation.”
If a current version of tax reform proposal is passed, it’s unclear whether losses incurred this year could be deducted in filings for future tax years.
Democrats are pushing to retain the existing provisions, saying special legislation should not be required for each incident to provide tax breaks to victims of natural disasters.
“It defies common sense to do away with deductions like this,” said Rep. Alan […]