Tax Breaks for Companies Helping Hurricane Victims
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What is the main topic discussed in this episode?
This is Your Money Matters from The Wall Street Journal. Welcome to Your Money Matters. I'm J.R. Whalen in New York. Hurricanes Harvey and Irma, amid all the tragic destruction, have brought out the best in corporate America, with many companies rushing to help those in need. But while providing financial aid and other support can return a feeling of satisfaction to those helping others, in some cases it could also return a tax break. And Wall Street Journal reporter Laura Saunders is here... in the studio with us with details. So, Laura, many tax benefits are available to companies who want to assist their own workers recovering after natural disasters?
There absolutely are, and the experts we talked to said that companies are not always aware of the different ways that they can help. Some of these are complicated, like foundations and things and charities and things like that, but others are very, very simple.
Now, you outlined a couple of categories of assistance in your Wall Street Journal story.
What tax benefits exist for companies helping employees after Hurricanes Harvey and Irma?
Some of them you say are actually very simple, one of them being direct assistance.
Yes. If an employer makes a payment to a worker to cover medical expenses, living expenses, personal expenses, transportation expenses, or even funeral costs, after a disaster like Harvey or Irma, then the payment is deductible by the employer and it's not taxable to the employee.
Oh, interesting.
That's very important to know. I mean, it said there's a kind of a free ride and you don't get that a lot in the tax code. Now, one of the important things to know is that it has to be in a qualified disaster area as defined by the tax code. So it's not just any time something bad happens. There are other things for that. But this is for qualified disaster areas. Now, counties affected by Harvey and by Irma are both qualified disaster areas. So if you give direct aid – and we know of companies that were handing out – hundred dollar visa cards, you know, prepaid visa cards to people to help buy bleach and things like that. That's deductible by the company and it's not taxable to the employee.
Wow. I'm sure that a lot of employees and employers don't know that.
Well, and another company got pre-arranged emergency housing with Irma. And so people who had their houses made uninhabitable could move into that to keep doing their jobs or whatever. And the company is paying for it. And again, it's deductible to the company and it's not taxable to the employees.
So when the president declares a disaster area and it triggers federal aid, is that part of the characteristics?
That's part of it. The IRS actually has to make an announcement about it, but that's about how it works. Yeah.
All right. We're speaking with The Wall Street Journal's Laura Saunders about tax benefits that may be available to companies that assist employees impacted by disasters such as Hurricanes Harvey and Irma. And you're listening to your Money Matters from The Wall Street Journal. Thanks for listening, everyone. Now, Laura, for employees, they can donate time off days to those in need also. Can you explain how that works?
Well, this gets a little more complicated because you have to have a program in place to do it. And there are two kinds of donations. One is that often a lesser paid employee who does not have maybe cash to give to aid or something might have built up vacation time. They can take a day or more days and and say, I forfeit this, I forego it, and then the employer takes the pay from that day and gives it to something like United Way or Salvation Army or something that's doing disaster relief in that area. Again, this has to happen because the IRS designates it and says it's allowed, and it has been allowed both for Irma and for Harvey victims, but you have to have a kind of a program, so it involves a little bit of expert help.
So it's not an employee donating the monetary equivalent of days off to another employee in need. It goes to an organization?
No, this is where the money would go to an organization. But the good part, there's no payroll taxes on it.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:02–1:04
2
What tax benefits exist for companies helping employees after Hurricanes Harvey and Irma?
1:04–5:18
3
How can direct payments to employees for disaster-related expenses be tax-deductible and non-taxable?
5:18–7:11
4
What qualifies as a 'qualified disaster area' for these tax breaks?
7:11–7:12
Speakers
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