TAX RELIEF FOR LOSSES CAUSED BY NATURAL DISASTERS

A natural disaster or other casualty can be bad news for your home or business, but you might be able to salvage a tax break.

Taxpayers can claim a casualty loss deduction on their tax returns if they’ve suffered a “sudden, unexpected or unusual” event — including a hurricane, earthquake, tornado, fire, flood, or storm. Auto collisions and thefts can also qualify. (However, no deduction is allowed for damage caused by gradual deterioration, such as destruction caused by termites or drought.)

If your region is officially designated as a “presidentially-declared disaster area,” you don’t even have to wait until you file your next tax return. You may be able to file an amended return and get a quick tax refund for fast financial relief.

There are some limitations on casualty loss deductions for personal assets (as opposed to business or investment assets):

1. You can’t deduct the first $100 of any casualty loss.

2. You can only write off casualty losses when the total amount for the year exceeds 10 percent of your adjusted gross income.

But there are no such limitations for businesses or income-producing property such as rental real estate.

You’ll need proof, though: Keep copies of newspaper clippings and police reports. Take “after” photos or videos of the disaster (“before” photos help too). In addition to compiling records and other proof, you may also have to substantiate the value of the property loss by getting an independent appraisal from a real estate expert. (The cost of the appraisal and the cost of obtaining photographs or videos may be deductible as a miscellaneous expense.)

The IRS has workbooks to help individuals and businesses figure their casualty or theft loss deductions. Click here for the workbook covering losses of personal property and click here for losses involving business or income-producing property.

If you have suffered a casualty loss related to a natural disaster, fire, theft or auto collision, we urge you to contact our firm at 402.423.4343 to see if you qualify for tax relief.

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