How Will My SBA Disaster Loan Affect My Taxes?
Provided by HG.org
Someone requires a Small Business Administration loan with low-interest for disasters such as the California wildfires and floods in Louisiana for business owners that are connected to the SBA as a private nonprofit, a homeowner, renter or someone that is running a small business. However, various loans and income may affect the taxes of the individual through deductions or additional expenses.
When a person needs an SBA disaster loan, it is to assist in recovering from a natural or other disaster from the federal government as a long-term disaster relief at times that the insurance company does not compensate and other forms of funding are not available. The SBA Office of Disaster Assistance and the Governor’s Office of Emergency Services work together, and the Federal Emergency Management Agency assists with business owners and other residents in affected areas recover from the complications as they arise.
When someone receives a loan, often any payments for the principle or interest provide a reduction in taxes based on how much was paid in during the year. The disaster loans are a means of providing a way to recover from natural and man-made disasters that affect the individual and the business in these events. They may be used as the owner or specific person sees fit, but it is imperative that funds are put back into a business or home quickly to reduce or eliminate complications that may arise from floods, fires and other natural tragedies. Paying back parts of these loans could increase the amount that is returned to the taxpayer. It is important to research these factors more fully.
The tax-deductible factors for small business loans for disaster circumstances could exist if either the home is used as collateral or other rules are introduced. Small businesses and individual owners are able to claim losses in federal tax returns based on the year a disaster occurs. Any interest or fees paid during the year often present the opportunity to deduct the taxes or provide benefits to the owner. Then, he or she may owe less for other income and revenue based on the monetary tax bracket the person or company has entered. While these disaster loans are often for businesses, individuals are able to acquire them when they own a home, rent or if they are connected to a private nonprofit organization.
Applying for the Loan
When the business owner, individual or homeowner is in need of a small business disaster loan, he or she should contact the Federal Emergency Management Agency shortly after the disaster has occurred. It is possible to protect the interests of the home when insurance or other avenues are cut off based on these situations. Others need to contact the Small Business
Administration for consideration in these matters. However, if the applicant is not eligible for a loan, the officials are able to explain this based on certain aspects of the situation quickly.
When a person has survived a disaster, it is important he or she applies with the SBA for the loans offered even when the are not needed. Without this first step, it is usually not possible to receive assistance from FEMA or similar agencies. The simple act of applying could lead to another source of grant aid such as the Other Needs Assistance or ONA program as administered through California. Other states may provide another type of grant help, and these may then reimburse the individual for loans, lost property, cars that were ruined, damaged buildings and for storages and moving costs after a home or commercial property has been destroyed.
When a homeowner is eligible for the loan, he or she may borrow as much as $200,000 for real estate property such as a primary residence. $40,000 is available for personal property destroyed in the disaster. A business could borrow up to $2 million with low-interest loans that are used for physical damage to commercial real estate and company buildings. These smaller businesses are able to borrow this amount for a combination of property and economic damages as per the SBA’s Economic Injury Disaster Loan programs available for these instances.
Legal Support in Disaster Loans
While tax forms need the required information, it is possible that additional sections need more information when a disaster loan has been acquired. It is essential to hire a tax lawyer to ensure the SBA disaster loan does not adversely affect the income taxes the applicant files.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.