Casualty Loss
Mother Nature can cause devastating damage to property owners, and she can strike at any time. As a homeowner, are you aware that this is considered a casualty loss, and that it can be deducted from your taxes? It's always good to review the casualty loss rules in order to determine the deductible loss. The following is a general summary of the income tax rules and since each taxpayer's circumstances differ, you should seek additional advice from a professional tax preparer.
The IRS definition of a casualty loss is a sudden, unexpected, or unusual event, such as a flood, fire, tornado, earthquake, or hurricane. If your situation meets the general rules and exceptions, you may have a deductible loss.
For nonbusiness property, such as a personal residence, the amount of casualty loss is the smaller of the decrease in the fair market value (FMV) of the property or the adjusted basis of the property. Then this is reduced by any insurance reimbursement received. Costs associated with clean up, temporary housing or other incidental expenses are not part of the casualty loss.
You will also want to consult your tax advisor when you have a loss to help you determine the correct documentation. Those documents could be appraisals or photos.
You can also find other tax related articles here.
Steven L Rumford, II
Clifton, Lipford, Hardison & Parker, LLC
