National Hurricane Preparedness Week Tavorro

Top 10 Tips for Deducting Losses from a Disaster

To mark National Hurricane Preparedness Week, the IRS wants you to know it stands ready to help. If you suffer damage to your home or personal property, you may be able to deduct the losses you incur on your federal income tax return. Here are 10 tips you should know about deducting casualty losses:

Casualty Loss

You may be able to deduct losses based on the damage done to your property during a disaster. A casualty is a sudden, unexpected or unusual event. This may include natural disasters like hurricanes, tornadoes, floods and earthquakes. It can also include losses from fires, accidents, thefts or vandalism.

Normal Wear and Tear

A casualty loss does not include losses from normal wear and tear. It does not include progressive deterioration from age or termite damage.

Covered by Insurance

If you insured your property, you must file a timely claim for reimbursement of your loss. If you don’t, you cannot deduct the loss as a casualty or theft. You must reduce your loss by the amount of the reimbursement you received or expect to receive.

When to Deduct

As a general rule, you must deduct a casualty loss in the year it occurred. However, if you have a loss from a federally declared disaster area, you may have a choice of when to deduct the loss. You can choose to deduct the loss on your return for the year the loss occurred or on an amended return for the immediately preceding tax year. Claiming a disaster loss on the prior year’s return may result in a lower tax for that year, often producing a refund.

Amount of Loss

You figure the amount of your loss using the following steps:

  • Determine your adjusted basis in the property before the casualty. For property you buy, your basis is usually its cost to you. For property you acquire in some other way, such as inheriting it or getting it as a gift, you must figure your basis in another way. For more see Publication 551, Basis of Assets.
  • Determine the decrease in fair market value, or FMV, of the property as a result of the casualty. FMV is the price for which you could sell your property to a willing buyer. The decrease in FMV is the difference between the property’s FMV immediately before and immediately after the casualty.
  • Subtract any insurance or other reimbursement you received or expect to receive from the smaller of those two amounts.

$100 rule

After you have figured your casualty loss on personal-use property, you must reduce that loss by $100. This reduction applies to each casualty loss event during the year. It does not matter how many pieces of property are involved in an event.

10 percent rule

You must reduce the total of all your casualty or theft losses on personal-use property for the year by 10 percent of your adjusted gross income.

Future Income

Do not consider the loss of future profits or income due to the casualty as you figure your loss.                         

Form 4684

Complete Form 4684, Casualties and Thefts, to report your casualty loss on your federal tax return. You claim the deductible amount on Schedule A, Itemized Deductions.

Business or Income Property

Some of the casualty loss rules for business or income property are different than the rules for property held for personal use.

You can call the IRS disaster hotline at 866-562-5227 for special help with disaster-related tax issues. For more on this topic and the special rules for federally declared disaster area losses see Publication 547, Casualties, Disasters, and Thefts. You can get it and IRS tax forms on IRS.gov/forms at any time.

 

Are you an Employer?

Stop Searching, Start Hiring! Post Your Jobs FREE at Tavorro.com and Get Matched with Top Talent Today!

Post Jobs Free!

Are you a Job Seeker?

View and Apply for Jobs and Open Internships by Creating Your FREE Tavorro.com Career Profile Today!

Get Started, It’s FREE!

Connect With Us!

icon-facebook icon-twitter icon-pinterest icon-instagram

 

About Tavorro

Start-up employment ecosystem that solves America’s unemployment problem. Through our disruptive technology and online job portal, we will put people back to work. #Tavorro #Jobs

Check Also

MLK DAY Tavorro Jobs

Favorite Martin Luther King, Jr Quotes

In honor of Martin Luther King Day, we would like to share a few of …

Happy Holidays from Tavorro

Happy Holidays From Tavorro

Tavorro Has Exciting Plans for 2015! In this season of gratitude we pause to say, …

Leave a Reply

Your email address will not be published. Required fields are marked *