Get the maximum benefit from a
casualty loss deduction
Violent weather can wreak
emotional and financial havoc. If your home, vehicle, or other personal
property is damaged or destroyed by a sudden, unexpected casualty, an itemized
tax deduction may help ease the financial burden.
In most cases, you claim a
casualty loss in the taxable year the calamity strikes. However, if you're in a
federally declared disaster area, you have the option of amending your prior
year return. Either way, to receive the maximum benefit you'll need to
calculate the amount of your loss. Here's how.
File an insurance claim. If your property is insured, file a timely
claim.
Get an appraisal. An appraisal determines the decline in fair
market value caused by the casualty. Tax rules require that you measure the
difference between what your home or property would have sold for before the
damage and the probable sales price afterward.
Establish basis. Generally, adjusted basis is what you originally
paid for the damaged property, plus improvements. If your records were lost in
the casualty, recreate them using reasonable estimates or the best information
you have.
Keep receipts for repairs. In some situations, repairs you make to
restore your property to pre-casualty condition can be used as an indicator of
the decline in the fair market value.
Remember, you're not alone. In
the aftermath of a casualty, we're here to help you resolve the tax issues.
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