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December 13, 2021 1:24 am
Disaster Relief Payments Are Tax Free
Victims of disasters may receive goods and financial help from organizations, such as the Red Cross. IRS Commissioner Rettig confirmed that such payments are not taxable to recipients. Gifts from organizations are specifically excludable from gross income (Code Sec. 102). The same tax-free treatment applies to gifts received from individuals; they are not included in gross income. Thus, for example, goods and other payments received by victims of the Surfside Condominium collapse are not taxable.
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Tax Glossary
Withholding
An amount taken from income as a prepayment of an individual’s tax liability for the year. In the case of wages, the employer withholds part of every wage payment. Backup withholding from dividend or interest income is required if you do not provide the payer with a correct taxpayer identification number. Withholding on pensions and IRAs is automatic unless you elect to waive withholding.
