MEMA clarifies tax status of relief payments to disaster victims

Disaster relief funds received from the federal government under the Disaster Relief and Emergency Assistance Act are not taxable, for the most part.

Gregory S. Michel, executive director of the Mississippi Emergency Management Agency delivered that news in a letter clarifying the tax status of disaster relief to relief recipients on Jan. 30.

“FEMA designates disaster relief payments as non-taxable” Michel wrote.

Quoting from the Internal Revenue publication 525, “Taxable and Nontaxable Income,” the letter stated:

“Disaster relief grants. Don’t include post-disaster grants received under the Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, or funeral expenses.”

This letter from MEMA was sent to disaster relief recipients on Jan. 30, 2020. (click to expand)

Many in the South Delta were concerned when they received 1099 forms showing the amount of relief they received. Business and other organizations use 1099s to report various types of income other than wages, salaries and tips, which are reported using a W-2 form.

Like all tax matters, whether the funds received are or are not taxable depends on numerous criteria. If, for example, a recipient received payment from an insurance claim for the same incident, they may have to report an equivalent amount received from the federal government.

Many types of government benefits are taxable including unemployment compensation. Social Security payments may or may not be taxable depending on your filing status and other income. Other kinds of government assistance are not taxable, including Temporary Assistance for Needy Families, also known as welfare or food stamps.

If you have questions on taxable and non-taxable income, consult with the IRS or a tax professional.