In light of Hurricane Helene and the subsequent assistance provided by the federal, state, and local governments along with other entities and individuals, many recipients are now asking, "will we be taxed for this?"

As with most questions in life, the most honest and shortest answer is, "it depends."

IRS Publication 525 provides the long answer (see pages 30-31 under "Disaster relief payments").  There, the IRS stipulates that a taxpayer can exclude "qualified disaster relief payments" from their income calculation on the year.  The IRS defines a "qualified disaster relief payment" as an amount paid to the taxpayer:

1. To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster;
2. To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it’s due to a qualified disaster;
3. By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or
4. By a federal, state, or local government, or agency or instrumentality in connection with a qualified disaster in order to promote the general welfare.

Importantly, the exclusion only applies to the extent that any expense is not covered by insurance or other means of reimbursement.

In Publication 525, the IRS goes on to define what a "qualified disaster" is.  Hurricane Helene is considered a qualified disaster after Gov. Cooper requested a Major Disaster Declaration to be granted and Pres. Biden approved it.  The Major Disaster Declaration covered 27 counties in North Carolina (Alexander, Alleghany, Ashe, Avery, Buncombe, Burke, Caldwell, Catawba, Clay, Cleveland, Gaston, Haywood, Henderson, Jackson, Lincoln, Macon, Madison, McDowell, Mecklenburg, Mitchell, Polk, Rutherford, Swain, Transylvania, Watauga, Wilkes and Yancey) as well as the Eastern Band of Cherokee Indians.

In a previous article, loans from the Small Business Administration (SBA) were discussed as part of a broader package of disaster relief.  It is important to note that, unlike, e.g., FEMA grants, the SBA loans are not considered disaster relief payments at all.  Still, SBA loans will not be taxed because they are not income - they are loans which do not get taxed.