Tax Tips

Hurricane Damage? You Might Qualify for Tax Breaks

If you have suffered property damage from Hurricane Irene (or other severe weather) this year, you may qualify for a tax break to offset losses that aren’t covered by your insurance.

SEE ALSO: Calculate Your Tax Deductions for Property Damage From a Natural Disaster

A portion of losses resulting from disasters such as floods, blizzards, tornadoes, earthquakes and hurricanes (but not accidents or deterioration) are deductible if they are not reimbursed by insurance. However, if the property is insured and you don’t file a claim, you can’t take a deduction.

Only itemizers may claim a deduction for damage to nonbusiness property. And there are a couple of offsets that apply to personal losses. First, you must reduce the amount of the loss by $100. Then, you must reduce the balance of the loss by 10% of your adjusted gross income. Any excess loss qualifies for an itemized deduction. So, if you have $20,000 in unreimbursed casualty losses, and your AGI is $100,000, you would first subtract $100. Then you would subtract $10,000 (10% of your AGI) from the $19,900 balance. The remaining $9,900 would be the amount you could deduct on your tax return.

We’ve created a calculator that helps you figure out your deduction. Use it to rough out your tax break. But when it comes time to file your return, you’ll want to consult IRS Publication 547. Casualties, Disasters, and Thefts, where you can find more information on the rules for writing off disaster losses.

The rules for deducting business casualty losses are more liberal. The $100 and 10% of AGI offsets do not apply, and nonitemizers can claim losses. (You cannot use the calculator to estimate business casualty losses).

A generous rule applies to losses in presidentially declared disaster areas: You may deduct 2011 casualty losses on your 2010 or 2011 return, whichever saves more money. If you have already filed your tax return for 2010, you can amend it and get a refund check from the IRS. So far, select counties and municipalities in New Jersey, New York and North Carolina have been declared disaster areas because of Irene, and more may follow. You can monitor the situation at http://www.fema.gov/news/disasters.fema.

The IRS is also in the process of announcing extensions for filing deadlines and tax payments for those living in disaster areas. You can follow those announcements at Tax Relief in Disaster Situations.

• Print
• Comments
• Email
• RSS