Because there are so many people whose home, car or property was damaged in a hurricane or even that big California fire, I thought I would give you a tax primer on what you can do in order to claim a casualty loss.
The general rule is that you can deduct your losses to the extent that you aren’t going to be reimbursed by insurance. Your loss is equal to the LESSER of (1) the properties’ adjusted basis or (2) the decline in value. All of this is reduced by any insurance reimbursement that you get or will expect to get. You would file IRS Form 4864 to claim this loss.
If the loss is for the non-business property, you must itemize your deductions. Moreover, there are two offsets from the loss:
First, you must reduce your loss by $100 (Although, if you experienced damage from hurricanes Harvey, Irma, or Maria, you won’t have to worry about this reduction.)
Secondly, you normally have to have your loss exceed 10% of your adjusted gross income, but again, if the loss is a result of the recent hurricanes, you may be able to avoid this limitation under a new law signed by the President which was the Disaster Tax Relief and Airport law.
Finally, you can claim your loss on your 2016 tax return if you wish by filing amended returns. Thus, you don’t have wait to file your 2017 tax return to claim the loss.
Always check with your tax professional about this before you file your tax return.
All content on this site is the property of Taxbot, LLC and/or Sandy Botkin. You may link to any article that you wish, or share via the social media buttons below. However, please do not copy articles or images for use on other sites without express written permission.