The Federal and State Tax Treatment of Disaster Relief Payments and Casualty Losses

Many Alabamians are struggling to cope with the devastating effects of the recent storms and flooding. Recognizing the need to alleviate some of the burden associated with the recovery, President Obama designated a number of Alabama counties federally declared disaster areas. As a result of this declaration, individuals living in these counties may qualify for an exclusion from gross income for payments received to reimburse certain disaster-related expenses. The purpose of this exclusion is to ensure that storm victims are not hit with an additional tax burden in connection with their loss.

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