Susan Found Relief from Financial Difficulties Following Hurricane Helene
Susan (name has been changed) didn’t realize how much damage Hurricane Helene caused to her HVAC system at first. Once power returned after the storm in Polk County, she experienced many power surges, but it wasn’t until winter weather hit that she discovered there was no heat.
“It was absolutely awful,” said Susan. “That was the coldest January I spent up here. I had no heat other than my space heater. My electric bill went way over $300 and normally it’s like $150 in the winter. It hit me hard all over.”
As a retiree in her 80s with social security as her only income and a denied homeowners insurance claim, Susan had no choice but to liquidate her IRA retirement account to pay for repairs. It was the only extra money she had.
A Disaster Threatened to Become a Tax Burden
Getting the repairs done was an issue in itself. Many companies had gone out of business, and the rest were backed up with many other clients. She finally got it repaired, using a chunk of her IRA, and then it came time to file taxes.
Susan received free tax preparation help at Pisgah Legal Services as she had in previous years. After running the numbers this year, Susan found out she would owe about $2,000 between federal and state taxes due to liquidating her IRA.
Saving Her Retirement
Not wanting to owe anything outside of her mortgage, Susan would have had to use some of the remaining IRA funds to pay off her taxes. However, Pisgah Legal also has a Low Income Tax Clinic (LITC) that helps with tax issues outside of standard filing. Knowing that she might qualify for some of the disaster-related tax deductions, the tax team referred her to LITC Program Director Gabrielle Paschall Trott.
Susan qualified for a special disaster retirement plan distribution. Gabrielle was able to increase her standard deduction by about $8,500 and spread her IRA distribution over three years due to the disaster-related tax benefits. Susan was thrilled.
She went from owing $2,000 to only $250, allowing Susan to hang on to the remainder of her retirement funds.
“That’s just a blessing to me,” said Susan.