You may be able to deduct disaster and casualty losses relating to your home or business on your federal income tax return. Losses are deducted on your federal return only and not your Vermont return. The IRS provides detailed guidance on this topic.
Before you file your deductions, be sure that your specific circumstances meet the IRS definitions for disasters and casualties. Also, be aware that you may only deduct losses not covered by your insurance or other reimbursement. You must deduct the loss on your return for the tax year in which the loss occurred.
The IRS provides a comprehensive Disaster Resource Guide for individuals and businesses. If you need help calculating the dollar amount of the loss to your personal or business property, visit the IRS website for tools, including workbooks.
Amending a Return
If you have already filed your federal income tax return for the tax year, you may file an amended return to deduct losses from income. If you file an amended return with the IRS, you must also file an amended return with the Vermont Department of Taxes to obtain a refund.
Extensions to File
The Department may extend deadlines for Vermont taxes, depending on the circumstances. If the IRS grants additional time to file returns, the Vermont Department of Taxes, at our discretion, may follow the lead of the IRS.
If the Department extends a filing deadline on short notice, we will post messages on our website and social media—Facebook and Twitter. If we anticipate an extended deadline, we will issue a press release and include a notice in our electronic newsletters.
Information for Out-of-State Businesses and Employees
When an officially declared state disaster or emergency occurs, recovery efforts to critical infrastructure may be assisted by the following:
- Out-of-state businesses not registered to do business in Vermont
- Employees who live out of state but who are employed by a business registered to do business in Vermont
The information here applies only to official disasters or emergencies declared by the president of the United States, governor of the State of Vermont, or the commissioner of Vermont Department of Public Service. Critical infrastructure means property and equipment owned and used by communication networks and electric generation, transmission, and distribution systems.
The work done by these businesses or employees may involve repairing, renovating, installing, building, and rendering services to areas of the state that have been damaged, impaired, or destroyed by the disaster or emergency. Businesses must be summoned to work in Vermont during the disaster response period under a mutual assistance agreement with an electric or telephone utility. The disaster response period covers 10 days prior to the disaster declaration and extends 60 days after the declaration.
While doing their recovery work during the disaster response period, out-of-state businesses are not required to register with or be licensed by the State of Vermont. They are not required to file and pay Vermont income taxes. However, if they are doing business in Vermont in ways not related to the disaster, these activities are subject to Vermont taxes.
Out-of-state businesses must pay other Vermont taxes or fees, however, such as the sales and use tax, meals and rooms, car rental tax, and fuel tax. If an out-of-state business makes retail sales of tangible personal property during the disaster response period, it must register for a Vermont business tax account and collect, file, and remit Vermont Sales and Use Tax to the Vermont Department of Taxes.
The State of Vermont does not view out-of-state employees working on recovery efforts during the disaster response period as earning income subject to Vermont income tax. The employee is not required to file and pay income taxes, and the employer is not required to withhold Vermont taxes from paychecks.
When the Disaster Response Period Ends
If an out-of-state business or an out-of-state employee continues to work in the state beyond the disaster response period, the business or employee becomes subject to Vermont laws that establish doing business in Vermont and Vermont residency. Each then is responsible for applicable taxes and fees.
For more information, see Vermont law at 11 V.S.A. Chapter 16.