Loans & Financial Resources for Weather Disaster Recovery

The United States government is working in collaboration with local communities to provide expeditious financial assistance to victims of weather disasters in support of damage recovery.  Financial aid is provided through a variety of means including disaster loans, grants, and casualty tax deductions for losses resulting from the destruction of property or unexpected calamities, such as diseases.  Events covered by the program include, but not limited to, floods, hurricanes, tornadoes, fires, earthquakes, and volcanic eruptions. Johnston (2016) cautions that the application process is arduous, requiring documentation proving the applicant’s ownership of the property in question, and that the property is located within an officially declared disaster area. 

Tip: Make a checklist and prepare for the worse before the next storm strikes.

Tax Deduction for Severe Weather Damage

A casualty loss is defined by the IRS as “sudden, unexpected, or unusual” damages to your property from events like “fire, storm, or shipwreck.” Examples of losses include a flooded basement during a hurricane or frozen pipes that burst during an Arctic outbreak. Gradual damages from deferred maintenance, a long, slow leak, or a termite infestation are not considered casualty losses.

The casualty loss tax deduction covers loss-related expenses not reimbursed by any other means. Out-of-pocket costs your homeowners insurance did not cover or your insurance deductible are examples. In addition to the direct casualty loss deduction, you can also claim indirect expenses such as medical bills for injuries, temporary housing, moving expenses and legal bills.

There are two ways to calculate the value of the loss. The difference in the property’s value before and after the damage, or the adjusted basis of the property immediately before the loss. Select the smaller amount and subtract any proceeds you receive from insurance or government assistance.

The tax deduction is limited to a loss over $100 and above 10% of your adjusted gross income. For example, your adjusted gross income for 2014 was $75,000, and you suffered an out-of-pocket loss to your home of $11,000. Your casualty loss deduction is $3400 ($11,000 minus $100 minus 10% of $75,000). File the loss of $3,400 on IRS Form 4684, for the year the damage occurred.

If your deduction value is substantial, consult with a tax professional. There are ways to maximize your income tax savings if you suffer a large-scale property loss. Losses can be carried back or forward on your tax returns for several years.

Keep good documentation! Audits of casualty loss claims are high. Good documentation includes evidence of a timely claim with your insurer, all repair bills, before and after photos of the property, professional appraisals, police reports, purchase receipts, and insurance settlement appraisals.

 

Disaster Loans and Grants

A report by Calder, (2016) confirms that FEMA is ready to offer grants to weather disaster victims in the United States. Based on the report, it is noted that the federal aid program of the United States is committed to offering approximately $33,000 per household as grants. Also, a typical grant can rise to a fraction of $8,000 or less. The advocate of payouts conducted in a couple of high-profile events that has occurred, is the most recently obtained statistics by this report. For instance, the analysis indicates that in Hurricane Katrina the grants offered by FEMA averaged in the $5000 range.

Disaster loans exist to support the affected individuals in their recovery of disaster-related financial losses. Weather disasters tend to hit the poor hardest due to insufficient credit and cash liquidity.  The U.S. is working around the clock to ensure the federal disaster small business administration loans are accessible to creditworthy debtors who have had a severe experience on physical damage to their properties and homes due to a disaster. According to a report by Jenkins, (2016), SBA loans are meant particularly for disaster victims, which are provided at low-interest to businesses regardless of the size, private non- profit institutions, household owner and real estate investors. The SBA loans are sufficient to help disaster victims to repair or replace damaged assets in a declared disaster. Currently, the SBA loans have accounted for up to 191 business disaster loans amounting to $16.5 million, and 2,959 disaster loans for household owners and renters amounting to $219.6 million in the United States. Although your credit history is examined, a low credit score doesn’t necessarily preclude qualification. The SBA typically takes financial hardship, brief employment gaps, and certain special circumstances into consideration and all of those factors can affect a credit score adversely.

Primary Credit Requirements:

  • Credit Profile – A bad credit score is not disqualifying; rather, your entire credit history will be examined and individual/special circumstances will be taken into consideration.
  • Ability to Repay – You must demonstrate to the SBA a strong desire to repay the loan, as well as the long-term fiscal stability to do so.

Conclusions

In conclusion, the economic impacts associated with weather disasters continue to provoke the interest of many economic experts as they try to balance the budgeting equation. Despite the fact that the government, private agencies, and the community are working hard to improve relief strategies, the costs associated with weather disasters will continue to skyrocket. Programs ranging from loans and grants to tax deductions may ultimately be insufficient to negate all of your financial burden imposed by a destructive storm, but every little bit helps. Most agree that the government needs to improve existing programs, and continue to develop efficient and effective alternatives to help consumers and small businesses overcome the emotional and financial challenges associated with weather disasters.

References

Calder, C. (2016). How much money can you expect from FEMA? Disaster grants sure to disappoint, analysis finds. Retrieved from: http://www.theadvocate.com/

Direct Lending Solutions, Understanding Credit Reports, https://www.directlendingsolutions.com/credit_reports_information.htm

Jenkins, R. (2016). SBA Encourages Louisiana Flood Survivors to Apply for Federal Disaster Assistance Loans. SBA has approved more than $236 million in loans to businesses, homeowners and renters impacted by flooding in the Baton Rouge area. Retrieved from: https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-encourages-louisiana-flood-survivors-apply-federal-disaster-assistance-loans

Johnston, S. (2016). How to get financial assistance after hurricane. Retrieved from: http://www.news4jax.com/weather/hurricane/how-to-get-financial-assistance-after-hurricane

Smith, A. B., & Katz, R. W. (2013). US billion-dollar weather and climate disasters: data sources, trends, accuracy and biases. Natural hazards, 67(2), 387-410.

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