With Hurricanes, Tornadoes and Flooding all peaking in the Fall, Texans consistently experience disaster related losses. Leading the country with the most tornadoes, on average 137 per year, Texans often find themselves struggling to cover repairs and deductibles. SECURE 2.0 Act of 2022 qualified disaster recovery distributions (QDRDs) have brought relief but as with tax codes, there is good and bad.
The Good. Taxpayers can withdraw up to $22,000 in QDRD’s per person, per event from their retirement accounts without the 10% penalty. You can repay all or part of it over three years and recover the associated income tax. You may also barrow from your company funded plans up to $100k or 100% of account balance. This needs to be repaid through payroll deduction. First payment begins within a year of the withdrawal. Secure 2.0 even allows for a personal emergency expense with a cap of $1,000. Time limits for withdrawals apply and company plan documents need to allow for loans.
The Bad. Joyriders steal and total your car…too bad. Dallas declares a disaster for flooding and you incur heavy losses…too bad. Texas declares a statewide disaster and you incur heavy losses…too bad. The Federal Government declares a disaster and its game on! Casualty losses are only applicable to federally declared disasters.
Too see if you are in a Federally Declared Disaster, go to www.FEMA.gov.