Claim Natural Disaster Home Damage on Your Taxes
2012 wasn’t a great year for homeowners—and that's not even considering foreclosures. There were wildfires, tornadoes, flooding, mudslides, more wildfires, more tornadoes and, oh, yeah, Hurricane Sandy.
Even if you have homeowner’s insurance, it may not have covered all of the damage to your home if you fell victim to one of these disasters. You may even have lost your house, along with other possessions. If so, you should know that you can deduct the damage not covered by your insurance to reduce your tax bill.
However, as with most things in the tax code, it’s not a super-simple process. Here’s what you need to know if you’re claiming a natural disaster loss.
What It Is
The official term for damage done to property is known as "casualty loss." The I.R.S. says that you can take this deduction if you suffered "the damage, destruction or loss of property from an identifiable event that is sudden, unexpected or unusual." This includes car accidents, fires, floods, storms and hurricanes.
(Plus some odd things, like sonic booms. Anyone live near an Air Force base?) Read I.R.S. Publication 547 to see if you qualify.
How It Works
This deduction isn’t just for your home. It can also apply to the loss of a car, furniture, jewelry or anything else that you could have gotten money for had you sold it. You can even apply this to landscaping if you had to hire someone to remove downed trees and branches.
If insurance — renter’s, homeowner’s or automobile — reimbursed you partially for the loss, your casualty loss only applies to what the insurance company didn’t cover. So if your loss was $21,000, and your insurance company gave you $10,000, then your casualty loss is $11,000. (This is why the deduction is especially useful for homeowners who realized too late that they weren’t covered for flood insurance.)
And if you’re still waiting to find out what your insurance company will reimburse, ask for an automatic, six-month extension to file your taxes.
If you received payments from the Federal Emergency Management Agency (FEMA) for repairs or a replacement of your damaged or destroyed home, those must also be subtracted from the casualty loss. But other FEMA payments for food and temporary housing don’t have to be deducted. So think of your casualty loss as what you’ll have to pay out of pocket to get your home back to where it was before disaster struck.
Read the rest of the article on LearnVest.com.