Expanded disaster tax relief

Two recent tax law changes strengthen relief for taxpayers affected by natural disasters. Beginning in 2026, personal casualty loss deductions are no longer limited to federally declared disasters. Certain state-declared disasters now may also qualify. Losses outside declared disasters may still be claimed, but only up to the amount of any casualty gains. But you must itemize deductions and additional rules and limits apply.

In addition, the Disaster Related Extension of Deadlines Act ensures that disaster-related filing extensions don’t reduce the time to claim refunds or credits. When the IRS extends filing deadlines due to federally declared disasters, the refund and credit claim period is now extended as well. The law also aligns the automatic IRS payment deadline with any disaster-based filing deadline extension.

A strategic trust option for tax-efficient gifting

Want to use the gift tax annual exclusion without giving up control? A Crummey trust can help. By allowing beneficiaries a brief window to withdraw each contribution, gifts to this irrevocable trust qualify for the exclusion ($19,000 per-recipient in 2026).

When the withdrawal right expires, the gifted assets remain in the trust (assuming the beneficiaries didn’t exercise their withdrawal rights), future growth is removed from your taxable estate and distributions are made according to the trust terms.

Crummey trusts are commonly used with irrevocable life insurance trusts (ILITs) so that annual exclusion gifts can fund the insurance premiums. This structure incentivizes beneficiaries to leave the funds in the trust so the policies can be maintained. Because the rules are technical, careful setup and administration are essential to avoid gift tax surprises.

Tax considerations when closing a business

Closing a business is a major turning point, but don’t forget to wrap up your tax obligations before moving on to your next chapter. File a federal income tax return for the business’s final year, and, if you had employees, make all required final federal tax deposits and file employment tax returns.

Payments of $2,000 or more (indexed for inflation starting next year) to independent contractors must also be reported. In addition, formally close your IRS account through a written request that includes your EIN, business name and address, and the reason for closure.

Finally, be sure to keep records of your business’s employment tax payments and any property owned. You also should generally retain tax returns forever and supporting records for at least three years after filing your last return, which covers the IRS’s standard statute of limitations. (But in some circumstances, it’s longer.)

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