by Krista A. Cohane
As reported in State Tax Update, 08/15/2023, the Hawaii Department of Taxation issued information on available taxpayer relief, for those affected by the devastating wildfires, including information on labeling paper tax returns; casualty losses; and general excise tax exemption for insurance proceeds received because of a natural disaster. The department has issued an amended notice providing additional details on filing instructions for requesting wildfire relief and details on disaster relief payments. (Hawaii Dept. of Taxation Announcements No. 2023-03, 08/23/2023.)
Filing instructions for requesting wildfire relief.
For taxpayers who file by paper and wish to request relief, they should clearly write “2023 Wildfire Relief” on the top center of the return, but not in the “DO NOT WRITE IN THIS SPACE” area in the upper right corner of any return. Taxpayers who file electronically and wish to request relief, should send a message at the time of filing via Hawaii Tax Online by selecting “I have a 2023 Wildfire Relief question” and include the information below.
Taxpayers requesting relief should include a brief statement explaining what specific relief they are requesting and how the wildfire disaster adversely affected their ability to meet their tax obligations. Paper filers can attach this statement when submitting their return(s) while electronic filers can include this statement with their message on Hawaii Tax Online. An adversely affected taxpayer may include any individual, business entity, or other person who is unable to file returns or unable to make payments because of the wildfire disaster. Depending on the circumstances, a taxpayer may be adversely affected even if their address is not within the area directly affected by the wildfire. The Department will consider all requests on a case-by-case basis.
Disaster relief payments.
Hawaii has adopted IRC § 139 in its entirety, which provides that any amounts received by an individual as a “qualified disaster relief payment” are excluded from the individual’s gross income and not subject to taxation. Based on the August 10 federal disaster declaration, the following amounts received by an individual may be excluded from gross income:
- amounts to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of the wildfires;
- amounts to reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence (or repair or replacement of its contents) to the extent that the need for such repair, rehabilitation, or replacement is attributable to the wildfires;
- amounts paid by a person engaged in the furnishing or sale of transportation as a common carrier due to death or personal physical injuries incurred as a result of the wildfires; and
- amounts paid by a federal, state, or local government, or an agency or instrumentality thereof, in connection with the wildfires, in order to promote the general welfare.
Qualified disaster relief payment amounts may only be excluded from an individual’s gross income to the extent that the individual does not receive compensation for the same loss from other sources, such as homeowner’s insurance. The general rule preventing double benefits applies to disaster relief payments. No deduction or credit is allowed for amounts that are excluded from gross income.
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