Possible tax break for a casualty loss - Sandy

[mwcpa]

First, I hope all of you are "okay" after Sandy ends its wrath of the eastern part of the country... high winds and water on the coast and snow more inland... powerful kick in the pants....

While some of this may be late the IRS does have some helpful data related to disaster preparations... www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Preparing-for-a-Disaster-(Taxpayers-and-Businesses)

The President has already declared some areas as "disaster areas" and normally the IRS provides relief to taxpayers in these areas. Check the IRS site to see if you qualify for some relief. FEMA site www.fema.gov/disasters

If you were one of the unfortunate who incurred some property damage the IRS provides a good summary of the tax related benefits that may provide some relief... www.irs.gov/taxtopics/tc515.html

Again, I hope you came through this unharmed (which is the most important thing), I was fortunate, I live in NYC and I only lost one tree (did not fall on any buildings), and will have lots of clean up from branches and debris that was blown around. No power, but I am looking at this as on opportunity to clean out the refrigerator (trying to turn something into a good)

[mmhmm]

Glad you didn't sustain any real damage, mwcpa, and that you're trying to find something positive to work toward. For some in the path of this storm, their optimism and fighting spirit is just about all they have left.

[The Captain]

mwcpa - Karma to you for (again) being pro-active in posting good informtion.

Just a small suggestion, most non accountant types might not realize casualty losses = tax deduction, so you may get more hits on this useful posting if you add tax deduction to the subject line.

[mwcpa]

I will try to change it... if not, I hope a moderator can...

Edit... seems I could change it....

[Savoir Faire-Demogague in NJ]

Thanks for posting this MW!!

My home took on water damage. Had to toss all furnishings and appliances.

Are there any tax loss issues that can arise? I have insurance and there are deductibles?

[mwcpa]

"Are there any tax loss issues that can arise?"

Tons..nor sure where you live (NY or NJ), but on NY1 this am they had a few CPAs discussing the ability to take any loss not covered by insurance in 2011 or 2012...

the hard part for many will be substantiating the basis in the property that was lost in the casualty.

" have insurance and there are deductibles"

Amounts covered by (or should have been covered by, in case someone does not make a claim) insurance or other funding are not losses for tax purposes... but if the deductible is substantial there could be a break....

[Savoir Faire-Demogague in NJ]

Nov 20, 2012 14:16:24 GMT -5 mwcpa said:

"Are there any tax loss issues that can arise?"

Tons..nor sure where you live (NY or NJ), but on NY1 this am they had a few CPAs discussing the ability to take any loss not covered by insurance in 2011 or 2012...

the hard part for many will be substantiating the basis in the property that was lost in the casualty.

" have insurance and there are deductibles"

Amounts covered by (or should have been covered by, in case someone does not make a claim) insurance or other funding are not losses for tax purposes... but if the deductible is substantial there could be a break....

Yes, substantiating is the issue. Fortunately for me, all the furniture was bought second hand at yard sales... total cost of roughly $200-225, so the loss is not a killer

Bought a Queen size and two single beds brand new, cost was about $800, I may even have the receipts....

Thanks...

[mwcpa]

if the loss is only $1,000, more than likely you will not get a great tax break, if any.

here is a link to a helpful publication.... www.irs.gov/publications/p547/ar02.html

[rangerj]

The loss deduction is the lesser of the difference in fair market value (FMV) immediately before the loss and after the loss OR the cost/adjusted basis immediately before the casualty. What is the FMV of used furniture that is not an antique? The cost of the FMV appraisal may be more than the deduction is worth. Then there is an Adjusted Gross Income limitation (10% of AGI). If you have insurance you must file a claim or reduce the tax deduction by the amount you could have claimed. That having been said, the government often provides for some relief in these disaster situations. See a tax professional.