Are You Eligible For Tax Benefits For Disaster Casualty Losses?
Lt. Zachary West/Public Domain
We have had quite a hurricane season so far. U.S. taxpayers in three states and the commonwealth of Puerto Rico are still reeling from the devastating effects and will be for quite some time thanks to Hurricanes Harvey, Irma and Maria. This brings me to the topic of Disaster Casualty Losses, which are eligible for special tax benefits.
A disaster loss is a casualty loss that occurs in a geographic area that the President of the United States declares eligible for Federal disaster assistance.
So, what constitutes a Casualty Loss?
A casualty loss is property damage from a sudden, unanticipated event such as earthquakes, fires, hurricanes, tornadoes, floods, and storms. Taxpayers within a federally declared disaster area can choose to claim their loss in the year it occurs or on the previous year’s return.
When to take the loss depends upon several factors including the tax brackets for each year. You’ll want to determine which year will provide the greatest overall tax advantage without wasting other tax benefits. You’ll also want to consider the immediate need for cash. The primary purpose of the disaster casualty loss rules is to allow taxpayers to receive a tax refund without waiting to file their return for the year of the loss.
You will have to prove the losses.
Taxpayers must prove the cost of the lost property and the amount of the loss. Photos of the property before and after are helpful, as are notes describing the property that was damaged, appraisals, and news clips describing the event. Blue Book values can be helpful in casualties that involve cars. Use a qualified appraiser to determine FMV of real property and scheduled personal property.
You can read in greater detail all of the requirements regarding disaster casualty losses at http://www.taxationsolutions.net/tax-topics/home-ownership/
If you have any questions please call our offices.