INDIANAPOLIS, Ind. -- Some Hoosiers have expressed concern that state and federal grants might cause them to sacrifice Social Security benefits, pay additional taxes, or give up income-based benefit programs, but state and federal officials say that concern is unfounded.
Steve DeBlasio, federal coordinating officer for the Indiana disaster recovery effort, said, "Federal and state grants to individuals do not add to their taxable income, as long as the grants are given as assistance to recover from a disaster."
The Federal Emergency Management Agency (FEMA) and Indiana Department of Homeland Security (IDHS) have awarded millions of dollars in grants to citizens affected by the recent severe storms and flooding. Those grants have paid for temporary housing and covered other disaster-related needs not reimbursed by insurance such as personal property loss, medical care and transportation.
Other related questions from Indiana disaster victims:
Question: I'm between 62 and 65, and receive Social Security benefits. If I earn more than a certain amount each year, I have to repay $1 of my Social Security payment for every $2 earned. Will FEMA grants add to my income and require me to repay Social Security?
Answer: No. FEMA grants for housing and other needs assistance are not counted as personal income.
Question: Will receiving grant money cause my income to increase to the point that I am no longer eligible for Medicaid, welfare assistance, food stamps or Aid to Families with Dependent Children (AFDC)?
Answer: No. Grants for assistance with disaster recovery are not counted as income in determining eligibility for any income-tested benefit programs that the U.S. government funds.
Question: I'm over 65, but if I earn more than a certain amount, I must pay tax on my Social Security income. Will FEMA grants boost my income and require me to pay tax on my Social Security income?
Answer: No. Again, the IRS does not count FEMA or state housing or other needs grants as income.
Question: Does any kind of FEMA or state grant count as income for federal/state income tax purposes?
Answer: No. In 2005 Congress passed, and the President signed, Public Law No. 109-7, which amended the Internal Revenue Code of 1986 to exclude qualified disaster mitigation payments from gross income. However, home improvements made by these grants could still be considered an increase in property value for property tax purposes.
"FEMA's mission is to help victims of disaster return to normal life as quickly as possible," explained DeBlasio. The last thing we want to do is jeopardize their financial well-being any further after they've suffered the damage and loss caused by a disaster."
FEMA coordinates the federal government's role in preparing for, preventing, mitigating the effects of, responding to, and recovering from all domestic disasters, whether natural or man-made, including acts of terror.