**SuperStorm Sandy Disaster Assistance**
Below are some of the ways you can handle any loss you may have incurred:
Apply for disaster assistance from FEMA?
IRS Topic 515 – Casualty, Disaster, and Theft Losses (Including Federally Declared Disaster Areas)
A casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption.
Generally you may deduct casualty and theft losses relating to your home, household items and vehicles on your Federal income tax return.
If you have insurance you offset any reimbursement against the actual incurred loss.
Whether Casualty or Theft-Key Steps
Take pictures to document the damage or loss. Save receipts for any related expenses as a result of the casualty (i.e. lodging, clean up, replacement purchases for clothes, household items, etc.)
Gather your HUD-1(RESPA) closing statement and information to establish basis, compile supports for any major additions/repairs you made to the property to establish the basis for determining the actual loss.
Read you Insurance Policies and go over with your professionals
Consider amending your returns for the loss
With the reported looting you can also claim a deduction for the value of the property taken after any insurance considerations. A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and it must have been done with criminal intent.
If your property is personal-use property or is not completely destroyed, the amount of your casualty or theft loss is the lesser of:
- The adjusted basis of your property, or
- The decrease in fair market value of your property as a result of the casualty or theft
If your property is business or income-producing property, such as rental property, and is completely destroyed, and the fair market value of the property before the casualty is less than the adjusted basis of the property, then the amount of your loss is your adjusted basis. Again any loss is reduced by insurance reimbursements.
Whether a casualty or theft loss, you must reduce it by any salvage value and by any insurance or other reimbursement you receive or expect to receive. The adjusted basis of your property is usually your cost, increased or decreased by certain improvements you have made to the property over the years or depreciation. Helpful IRS information is Topic 703, or Publication 547, Casualties, Disasters, and Thefts. You may need to determine the decrease in fair market value by appraisal, or if certain conditions are met, by the cost of repairing the property (refer to Publication 547).
Individuals are required to claim their casualty and theft losses as an itemized deduction on Form 1040, Schedule A (or Form 1040NR, Schedule A, if you are a nonresident alien). For property held by you for personal use, once you have subtracted any salvage value and any insurance or other reimbursement, you must subtract $100 from each casualty or theft event that occurred during the year. Then add up all those amounts and subtract 10% of your adjusted gross income from that total to calculate your allowable casualty and theft losses for the year.
Use Form 4684 for Casualty and Theft losses
Section A is used for personal-use property, and Section B is used for business or income-producing property. If personal-use property was damaged, destroyed or stolen, refer to Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property). For losses involving business-use property, refer to Publication 584B, Business Casualty, Disaster, and Theft Loss Workbook.
Casualty losses are generally deductible in the year the casualty occurred. Since Sandy was federally declared a natural disaster that is in an area getting public or individual assistance (or both), you can choose to treat the loss as having occurred in the year immediately preceding the tax year in which the disaster happened, and you can deduct the loss on your return or amended return for that preceding tax year and potential get a refund to assist you financially.
Theft losses are generally deductible in the year you discover the property was stolen unless you have a claim for reimbursement that you believe you will receive. No deduction is available until the taxable year in which it can be determined with reasonable certainty whether or not such reimbursement will be received.
If your loss deduction is more than your income, you may have a net operating loss. You do not have to be in business to have a net operating loss from a casualty. Refer to Publication 536, Net Operating Losses for Individuals, Estates, and Trusts for further information.
Please consult with your tax professionals.
Visit www.irs.gov for more detailed information.