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Hello,Under Section 139 of the Internal Revenue Code, federal gross income does not include any amount received by an individual as a “qualified disaster relief payment,” which includes amounts paid to an individual to reimburse or pay reasonable and necessary expenses for the repair or rehabilitation of a personal residence, or for the repair or replacement of the residence's contents, to the extent attributable to a “qualified disaster” and not compensated by insurance or otherwise. “Qualified disaster relief payment” are also generally excluded from New York State taxable income.
The person would need to adjust any amount they claim for casualty loss on their federal return. In other words they cannot claim the full casualty loss if the receive assistance form NYS Rising Housing Recovery also.