Note: The 2018 Tax Cuts and Jobs Act has suspended the itemized deduction for personal casualties and theft losses for tax years 2018 through 2025.
Generally, if you choose, you may repay a portion of a qualified 2016 or 2017 disaster distribution. You may make this selection only if the distribution is eligible to be treated as a tax-free rollover in an eligible retirement plan. If you took a qualified disaster distribution in 2016 or 2017 for hardship from your retirement plan, you may repay the distribution. There are exceptions that apply to repayment of qualified 2016 and 2017 disaster distribution.
From the day, after the date, you receive the qualified 2016 or 2017 disaster distribution, you have three (3) years to make the repayment. The repayment amounts are treated as trustee-to-trustee transfer and are not considered income. The repayment to an IRA is not considered a rollover so there is no issue with the one rollover limitation per year for IRAs. If you need additional information on how to report your repayments, please reference Forms 8915A or Form 8915B, as applicable.
Exceptions. The following types of distributions can’t be repaid per the IRS:
- "Disaster distributions received as a beneficiary (other than surviving spouse) that was a qualified 2016 or 2017 disaster distributions.
- Required minimum distributions.
- Periodic payments (other than from an IRA) that are for:
- A period of 10 years or more,
- Your life or life expectancy, or
- The joint lives or joint life expectancies of you and your beneficiary.”
Repayment of Qualified Distributions for the Purchase or Construction of a Main Home
You may repay all or part of a qualified distribution that was taken to purchase or construct a main home. The main home must be in the disaster areas for Hurricanes Irma, Harvey or Maria. The distribution must have been from an eligible retirement plan and was taken during the period which began on August 23, 2017 and ended on February 28, 2018.
If your qualified distribution was to construct of purchase a main home in the disaster area for the California wildfire, you may repay all or part of that distribution. The distribution must have been from an eligible retirement plan and was taken during the period which began on October 8, 2017 and ended on June 30, 2018.
Per the IRS: the distribution must meet all the following to be considered a qualified distribution.
- "The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA.
- The distribution was received after February 28, 2017, and before September 21, 2017, for Hurricane Harvey, Tropical Storm Harvey, Hurricane Irma, and Hurricane Maria. For the California wildfires, the distribution was received after March 31, 2017, and before January 15, 2018.
- The distribution was to be used to purchase or construct a main home in the Hurricane Harvey, Irma, or Maria disaster area, or in the California wildfire disaster area that was not purchased or constructed because of Hurricane Harvey, Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, or the California wildfires.”
Any amount repaid by March 1, 2018 (July 1, 2018 for California wildfires) is considered a trustee-to-trustee transfer. This should not be included in income. The repayment is not considered a rollover so there is no issue with the one rollover limitation per year for IRAs.
A qualified distribution that is not repaid before March 1, 2018 (July 1, 2018, for California wildfires), could be taxable for 2017 and subject to the additional 10% tax (or additional 25% tax for certain SIMPLE IRAs) on early distributions.
Form 8915B, must be filed if you repaid a qualified distribution, partially or completely, before March 1, 2018 (July 1, 2018, for California wildfires).