If you have employees who have been affected by disasters such as hurricanes, tornadoes, floods or wildfires, you may be able to help them financially by giving them a Qualified Disaster Relief Payment. This money is tax-free to the employee and fully deductible for you—no payroll tax, no income tax.
✅What you can cover (all tax-free):
• Temporary housing or hotel bills
• Replacement of food, clothing, household goods
• Child-care or elder-care while the family is displaced
• Generators, repairs, debris removal to make a home safe
• Medical, funeral, or counseling expenses
❌What doesn’t qualify:
• W-2 wages or vacation pay (it can’t replace income)
• Costs already reimbursed by insurance or FEMA
• Lavish or unrelated perks—keep it “reasonable and necessary”
Four-step game plan:
1. Confirm the disaster: Check the current list on the FEMA Disaster Declarations page or the IRS’s Tax Relief in Disaster Situations page.
2. Setup a simple policy: Add a policy to your employee handbook, or send out a simple email to your team that lists: eligible expenses, max dollar amount, proof needed (i.e. a receipt), and any other terms you want to include.
3. Reimburse Them: Follow your normal process for expense reimbursements (e.g. payroll, AP check, etc.) and make sure to include “§139 Relief” in the description when entering it into your accounting system.
4. Keep a Log: Keep a simple log with date, employee name, amount, reason, and proof.
If you’re working through a disaster right now—or want a template policy—please reach out to me and I’ll be happy to help.
