How do the tax rules work on deducting personal losses due to storms and other natural disasters?
Tax experts usually refer to these storm losses as “casualty and theft” losses. These experts also point out that, under current law, it might be difficult to deduct little or none of your losses. Why is this?
- You have to reduce each casualty or theft loss by $100.
- You can only deduct your losses to the extent they exceed 10% of your adjusted gross income.
“If you collect insurance proceeds or other types of reimbursements (such as an employer’s emergency disaster fund), you have to subtract those when calculating your loss. ‘You do not have a casualty or theft loss to the extent you are reimbursed,’ the Internal Revenue Service says in Publication 547 (available at www.irs.gov).”
Even though this is the case, there is still hope in being able to deduct your losses. If you are in a federal disaster area and your casualty loss occurred there, you can deduct your losses on your federal income-tax return for the year the loss occurred or on your return for the prior year.
By using IRS Form 1040X, one can file an “amended” return for the 2012 fiscal year as well.
- IRS Announces Tax Relief For Oklahoma Tornado Victims (forbes.com)
- IRS Gives Tax Relief To Oklahoma Tornado Victims ~ Return Filing and Tax Payment Deadlines Extended to Sept. 30 (vim4u.wordpress.com)
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.