Natural disasters can be financially and emotionally hard. The IRS allows certain expenses related to your property damage to be filed. In the form of a tax deduction, the IRS allows you to claim the property that you lost on your income taxes. You must itemize to receive the deduction. There are also a few rules to remember to make sure you qualify for this deduction.
Rule #1: You must be in a designated disaster area.
This rule is self-explanatory, you can only claim this deduction if you live in an affected area.
Rule #2: The 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.
Rule #3: Insurance Coverage
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.
Rule #4: It must be greater than your standard filing deduction.
It is only worth it if the loss due to a natural disaster exceeds the amount of your standard deduction. For example, in 2016 Standard deductions are as follows:
So, if Keshia’s 2017 tax year filing status is Single, her storm deductions must exceed $6,300.
What is considered deductible?
Deductions includes your land, vegetation growing on the land, your home, your garage and anything attached to your home, such as plumbing, well pump or light fixtures. Personal property is anything movable on your land or in your home, including your car, clothes, furniture and paintings. Basically, any personal property that is at the affected location.
What is considered non-deductible?
The IRS does not accept the cost of appraisals or photographs as part of your loss. If the cost of these expenses exceeds 2 percent of your adjusted gross income, you can claim the costs as a miscellaneous deduction on Schedule A. The cost to repair damaged property and the cost to clean up after a disaster is not part of a casualty loss; however, you can use the cost to measure the decrease in the item’s fair market value. A casualty loss does not include losses from normal wear and tear. It does not include progressive deterioration from age or termite damage.
Note: This type of deduction is extremely advanced, and should not be attempted by anyone who is not a licensed professional tax preparer. Incorrect, fraudulent or misleading information can result in penalties, audits and even criminal charges.
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