Deducting Weather Related Damage From Your Taxes
Homeowners insurance can protect your home and possessions during damaging weather but many homeowners do not realize that storm damages can also be deducted from their taxes as well.
Storm damage can allow you to deduct a casualty loss on your homeowners insurance policy.
Your casualty loss becomes a decrease in the fair market value of your home as a result of weather related damage or the adjusted basis of your property if that amount is smaller.
Once you have determined the casualty loss amount, the loss will need to be reduced by any reimbursements received or expected from your homeowner's insurance claim and then reduced again by $100.
A taxpayer can then deduct the final amount as an itemized deduction if it exceeds 10 percent of your adjusted gross income.
Please note, casualty loss deductions are not subject to the itemized deduction phase-out rules that are based on adjusted gross income.
Casualty losses are normally deductible in the year they happen.
However, if the loss occurs in a presidentially declared federal disaster area, a homeowner can elect to deduct the loss on their tax return for the preceding year.
If the damaged property is business property, there are different rules for calculating the casualty loss.
There is no $100 reduction in the insured reimbursement claim and the deduction is not limited by a percentage of your adjusted gross income.
As with any important insurance related paperwork, keep complete records and documentation of your home or business casualty damages.
This should include photographs, cost estimates for repairs, invoices, receipts and canceled checks and always maintain separate records for personal and business property.
Tax and financial ramifications of storm related casualties for your home or business can be difficult to calculate and manage so consider getting help from a professional tax or financial adviser if your casualty damage is significant.
Finally, for the most current information available on the tax implications of weather related casualty losses, go to www.
irs.
gov
Storm damage can allow you to deduct a casualty loss on your homeowners insurance policy.
Your casualty loss becomes a decrease in the fair market value of your home as a result of weather related damage or the adjusted basis of your property if that amount is smaller.
Once you have determined the casualty loss amount, the loss will need to be reduced by any reimbursements received or expected from your homeowner's insurance claim and then reduced again by $100.
A taxpayer can then deduct the final amount as an itemized deduction if it exceeds 10 percent of your adjusted gross income.
Please note, casualty loss deductions are not subject to the itemized deduction phase-out rules that are based on adjusted gross income.
Casualty losses are normally deductible in the year they happen.
However, if the loss occurs in a presidentially declared federal disaster area, a homeowner can elect to deduct the loss on their tax return for the preceding year.
If the damaged property is business property, there are different rules for calculating the casualty loss.
There is no $100 reduction in the insured reimbursement claim and the deduction is not limited by a percentage of your adjusted gross income.
As with any important insurance related paperwork, keep complete records and documentation of your home or business casualty damages.
This should include photographs, cost estimates for repairs, invoices, receipts and canceled checks and always maintain separate records for personal and business property.
Tax and financial ramifications of storm related casualties for your home or business can be difficult to calculate and manage so consider getting help from a professional tax or financial adviser if your casualty damage is significant.
Finally, for the most current information available on the tax implications of weather related casualty losses, go to www.
irs.
gov