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FAQs for Disaster Victims – Expensing of Qualified Disaster Expenses (Section 198A))

(03/09) Q: When and how can a business taxpayer treat disaster expenses that are not chargeable to a capital account?

A: Section 706 of the National Disaster Relief Act of 2008 allows taxpayers to elect to currently deduct qualified disaster expenses in the tax year paid or incurred.

Qualified disaster expenses consist of expenditures paid or incurred in connection with a trade or business or with business-related property that otherwise must be capitalized and that are:

  1. for the abatement or control of hazardous substances that were released on account of a federally declared disaster;
  2. debris removal or demolition of structures on real property damaged or destroyed by a federally declared disaster; or
  3. for the repair of business-related property damaged by a federally declared disaster.

A federally declared disaster is any disaster subsequently determined by the President to warrant assistance by the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. This provision is effective for amounts paid or incurred after December 31, 2007, in connection with disasters declared after that date and federally declared disasters occurring before January 1, 2010.

Information on disaster areas may be found at the Federal Emergency Management Agency (FEMA) website.  For more information on these tax law changes, see Publication 547, Casualties, Disasters, and Thefts.

These changes to the law do not apply to the casualty losses that result from the Midwestern area disasters declared during the period beginning on May 20, 2008, and ending on July 31, 2008.  See Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas.

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Page Last Reviewed or Updated: 03-Apr-2017