HR 140119th CongressIn Committee

Hurricane Helene and Milton Tax Relief Act of 2025

Introduced: Jan 3, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Hurricane Helene and Milton Tax Relief Act of 2025 would provide targeted tax relief for individuals and organizations affected by Hurricanes Helene and Milton, focusing on those whose principal residence was in the disaster areas during a defined incident period (Sept. 28, 2024, to Nov. 2, 2024). The bill would allow an elective change in how the Earned Income Credit (EIC) is calculated for eligible disaster-area taxpayers, expand and accelerate charitable deductions for disaster relief contributions, and create special rules for retirement plans and distributions related to disaster relief. In short, it aims to ease tax burdens and increase liquidity for affected individuals and relief-focused organizations, while also facilitating retirement-plan flexibilities tied to disaster relief activities. The bill is introduced but not enacted yet. If enacted, its provisions would apply to specific disaster-affected individuals and activities related to Helene and Milton, with dates and eligibility tied to the incident period and declared disaster areas.

Key Points

1Eligible disaster area and EIC election: An “eligible individual” in a qualified hurricane disaster area (where a presidential major disaster under the Stafford Act was declared for Helene or Milton) for the incident period can elect to determine their earned income credit (EIC) for the applicable tax year using their preceding year’s earned income instead of the current year’s if the current year’s earned income is lower. This election would apply to any tax year including portions of the incident period and has specific joint-filer rules and error-treatment provisions.
2Increased charitable deduction for disaster relief: The bill temporarily increases the amount of qualified hurricane disaster contributions that can be counted for purposes of the charitable deduction, with special carryover rules for excess contributions over five years. It allows Congress-defined qualified hurricane disaster contributions (cash gifts to qualifying organizations for Helene/Milton relief) paid in 2024-2025 to be treated favorably for individuals and corporations, including an option to treat contributions paid after 2024 but before April 15, 2025 as made in 2024.
3Above-the-line deduction for disaster contributions: The bill makes qualified hurricane disaster contributions deductible above the line (an "above-the-line" deduction that reduces adjusted gross income) by increasing the standard deduction by the amount of the charitable deduction that would not be allowed otherwise. This increases overall deduction potential for eligible taxpayers.
4Disaster-related retirement-fund relief: The bill creates special rules for using retirement funds in response to the disaster, including penalty-free distributions from qualified plans (no 72(t) early-distribution penalty), a $100,000 cap on lifetime distributions per individual from all plans, the ability to roll distributions back into other retirement plans within three years, income-spreading options over three years, and revised plan-operations rules to accommodate such distributions. It also includes provisions for recontributing disaster distributions used for home purchases and temporarily expanded loan rules (higher loan limits and repayment delays) for plans in effect through mid-2025.
5Plan amendments and retroactivity: If a plan amendment is enacted as part of this statute, it would be treated as operating under the amended terms for the specified relief period, with retroactive application to encourage plan sponsors to adopt the changes promptly.

Impact Areas

Primary group/area affected: Individuals and households whose principal residence was in the qualified hurricane disaster areas during the incident period (Sept. 28, 2024 – Nov. 2, 2024) and who sustained economic losses from Hurricanes Helene or Milton.Secondary group/area affected: Employers and sponsors of qualified retirement plans (including 401(k), 403(b), and similar plans) that would implement the disaster-related distribution, loan, recontribution, and plan-amendment provisions; charitable organizations receiving qualifying hurricane disaster contributions; and taxpayers who use charitable contributions for disaster relief relief purposes.Additional impacts: Potential revenue and tax-collection effects for the federal government due to changes in EIC calculations, enhanced charitable deductions, above-the-line deduction adjustments, and more liberal retirement-plan distributions/loans. There are also administrative and compliance implications for tax software, payroll systems, and plan administration to handle the new rules and retroactive treatment.Eligible individual: A person who lived in a disaster area during the incident period and who suffered economic loss due to the hurricanes.Qualified hurricane disaster area: Areas in which a president declared a major disaster under the Stafford Act for these hurricanes.Incident period: The defined window of September 28, 2024, to November 2, 2024.Earned Income Credit (EIC): A refundable tax credit for low- to moderate-income workers; the bill would allow using previous-year earned income to compute the credit in disaster years if current-year earnings drop.Qualified hurricane disaster contribution: A cash charitable donation to a qualifying organization aimed at disaster-relief efforts for Helene or Milton, with specific documentation and timing requirements.Qualified hurricane disaster distribution: A retirement plan distribution related to the disaster that can be taken without the usual 10% early-distribution penalty, with special tax-treatment rules and an option to repay.

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