Storm Damage? You Might Qualify for Tax Breaks
If you suffered property damage from Hurricane Sandy (or Hurricane Isaac or other severe weather), you may qualify for a tax break to offset losses that aren't covered by your insurance.
SEE ALSO: Calculate Your Tax Deductions for Property Damage From a Natural Disaster
Losses resulting from disasters such as hurricanes, floods, blizzards, tornadoes and earthquakes (but not accidents or deterioration) are deductible if they are not reimbursed by insurance. However, if the property is insured and you don't file a claim, you can't take a deduction.
Only itemizers can take a tax write-off for damage to nonbusiness property, such as a principal residence or vehicle. And there are a couple of offsets that apply to personal losses. First, you must reduce the amount of the loss by $100. Then, you can deduct the balance only to the extent that it exceeds 10% of your adjusted gross income. For example, if you have $20,000 in unreimbursed casualty losses from Hurricane Sandy and your AGI is $100,000, you would first subtract $100. Then, you would subtract $10,000 (10% of your AGI) from the $19,900 balance. The remaining $9,900 is the amount you can deduct on Schedule A of your tax return. Use IRS Form 4684 to report your casualty losses, and then carry the amount over to Schedule A.
We've created a calculator that helps you figure out your deduction. Use it to rough out your tax break. But when it comes time to file your return, you'll want to consult IRS Publication 547, Casualties, Disasters, and Thefts, where you can find more information on the rules for writing off disaster losses.
The rules for deducting business casualty losses are more liberal. The $100 and 10%-of-AGI offsets do not apply, and nonitemizers can claim losses. (You cannot use the calculator to estimate business casualty losses.)
A generous rule applies to losses in presidentially declared disaster areas, such as the locales affected by Hurricanes Sandy and Isaac. You can deduct 2012 casualty losses on either your 2011 or 2012 tax return, whichever saves more money. Since you've already filed your return for 2011, you can amend it and get a refund check from the IRS. Check out www.fema.gov/disasters to view a list of presidentially declared disaster areas.
One other favorable piece of tax news: The IRS has announced that businesses affected by Hurricane Sandy will have until Nov. 7 to file payroll and excise tax returns that were originally due on Oct. 31. More tax filing relief is expected, and you can monitor the announcements on the IRS website at Tax Relief in Disaster Situations.
- Children's corpses reveal desperate attempts to escape Korean ferry |
- Russia says it will respond if Ukraine interests attacked |
- 'Bridgegate' scandal threatens next World Trade Center tower
- Obama seeks to ease Asian allies' doubts during visit to Japan |
- NYPD Twitter campaign backfires, thousands of negative tweets