Hurricane Damage Tax Deductions! What Storm Damage Costs Can Be Written-Off On Tax Returns?

hurricane sandy tax deductions2012 has been a very active year in terms of natural disasters and activities across the United States! It was certainly a scary time for many who faced the storms head on and for those to who had their property damaged. The road to rebuilding surely has been a tiresome task for many; however, if it is of any consolation, there are some storm-related tax deductions which may assist with the recovery process. Below is a brief overview of the federal tax relief available for those adversely affected by the 2012 weather events.

What is a Casualty Loss?

A casualty loss generally results from the damage of property from any sudden, unexpected, or unusual event such as hurricanes, tornadoes, earthquakes, floods, and fires. The damage can occur to both personal and business properties. For example, damage to homes, household items, vehicles, etc. are all items for which a casualty loss can be claimed.

How Much Storm Damage Can Be Claimed?

For personal property (i.e., home, vehicles, etc.) the amount claimed is generally the lesser of: (a) the adjusted basis in your home, or (b) the decrease in the fair market value as a result of the casualty event.

So what is basis? In the simplest of explanations, it is the cost of your home plus any major improvements added (i.e., fencing, roofing, etc.) minus any prior deductions claimed against the home (i.e., depreciation for business usage, prior casualty claims, etc.). And what about the fair market value decrease? In many cases the cost of repair can be considered the amount of the fair market decrease.

Lastly, there is a major catch! You must file a claim with your insurance company; however, you cannot deduct amounts reimbursed. In many cases you must also deduct $100 per event before subtracting 10% of your adjusted gross income from this amount.

How to Claim Storm Damage Amounts on a Tax Return

Casualty losses are claimed on IRS Form 4686. There are also other rules that apply to claiming casualty losses not discussed above due to their complexity. As such, it is advised that you work with a tax professional to learn how to properly file for casualty claims on your tax returns.

Click on the links below for the following:

IRS From 4686, Casualties and Thefts

IRS Form 4686, Casualties and Thefts Instructions

Simply Taxes, LLC is a local year-round tax preparation firm with an office located in North Raleigh. Our Raleigh accountants are ready to assist you with your questions pertaining to your taxes!

The information contained within this article is for general guidance only. As such, it should not be used as a substitute for consulting with professional accounting, tax, legal or other competent advisers.

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