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Federal Tax Update — October 2017

from By David S. De Jong, Esq., CPA, Stein Sperling Bennett De Jong PC

Public Law 115-63, the Disaster Tax Relief and Airport and Airway Extension Act of 2017, modifies existing law to provide tax relief to victims of Hurricanes Harvey, Irma and Maria as follows:
  • Allows casualty losses to be claimed without the 10 percent of adjusted gross income floor, as well as by nonitemizers (in their case by increasing the standard deduction by the net disaster loss) with no reduction for alternative minimum tax purposes while increasing the $100 per casualty floor to $500.
  • Suspends the adjusted gross income limitations on related charitable contributions.
  • Allows optional use of prior year earned income in determining the allowable earned income tax credit and child tax credit.
  • Allows withdrawals from qualified retirement plans by those under 59½ without penalty with the right to recontribute over a three-year period.
  • Increases maximum borrowing from qualified retirement plans to the lesser of present value or $100,000 with repayment commencing one year later than otherwise required.
In Knez v. Commissioner, TC Memo 2017-205, the Tax Court determined that a married individual who filed improperly as head of household could change to a married filing joint status even after issuance of a Notice of Deficiency. The court noted that it previously permitted a change from an improper single filing status to married filing joint after issuance of a Notice of Deficiency and distinguished both situations from a change from married filing separate to married filing joint after the Notice of Deficiency. more

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