Devastating and catastrophic natural disasters such as floods, hurricanes, and tornadoes have one line of commonality: the property damage they cause is deductible from income taxes, if such is reported by the sufferer. If any of these natural disasters destroy one’s house, vehicle, or household possessions, such a person is eligible for the said tax break since the IRS regards these as sudden, unusual, or unexpected occurrences. The IRS simply comes to an affected taxpayer’s aid by writing-off part of the loss from their income tax.
One should, however, not start to entertain the infantile ideas of recovering the full value of their loss, since there are limits. If such a person has insurance cover, they will first have to file a claim. The insurance payout one receives will be considered when writing-off the loss suffered. Basically, the amount such person receives from their insurer will be deducted from the amount to be subtracted from their taxes. In case one decides not to lodge a claim, they can only deduct the loss not covered by their policy.
Events qualifying for tax breaks:
If one’s personal property falls victim to accidents, burglaries, terrorist attacks, storms, tsunamis, fires, riots, earthquakes, and such other occurrences as outlined by the National Disaster Relief Act, one will be able to deduct a part of the loss their income tax bill.
It is a general requirement that one deducts their loss in the year that such occurred, unless the loss is occasioned by a disaster and the head of state has designated one’s community a federal disaster area.
Determining the deduction one qualifies for:
Once one has determined that the loss they suffered qualifies for the federal tax deduction and has already lodged a claim with their insurer, they’ll in all likelihood, want to know exactly how much they can recover by writing off their loss. To determine the amount, one will need to collect all related papers to prove the monetary value of the property lost and the repair costs, if any.
When one has calculated the value of the loss, it is then possible to determine the exact amount to be deductable from one’s federal taxes. If the event affected property not meant for business use, personal use property, one is allowed to deduct only $500 for every item of property so destroyed.
In case thievery or a natural calamity in a non-presidentially declared region occasioned the loss, one can subtract a further 10 percent based on their adjusted gross income. In order to bolster one’s claim, it is imperative that a taxpayer finds “before and after” photographs of the damaged, lost or destroyed items. Additionally, one should have all the checks, receipts, deeds, and even professional appraisals in order to present them when required. A professional appraisal is a brilliant way of proving one’s insurance claims.
In case one needs help in calculating the tax write-off they qualify for, it is prudent that they seek the help of a tax preparation expert. The Casualty, Disaster and Theft Loss Workbook, a handbook provided by the IRS, can also be of immense help in determining one’s eligibility for tax write-offs.