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Deducting Disaster Expenses On Your Taxes: Did you experienced a loss last year?
Posted By Ron On April 16, 2012 @ 8:12 AM In Taxes | Comments Disabled
Hurricanes, tornadoes, wind storms, floods, earthquakes, tsunamis. These are devastating natural disasters but if your house, automobile, or other household items or possessions are damaged or destroyed due to what the IRS calls “sudden, unexpected or unusual” events – including natural disasters and even theft – you could be eligible to write off at least a portion of the loss on your federal income tax return.
But as with everything tax related, there are limits and eligibility requirements. First, you’ll have to file an insurance claim (if you carry coverage for the event) and how much you’re compensated by your insurer will be considered. For homeowners insurance  or renter’s insurance, after you file a timely claim for reimbursement, the amount you receive from the insurance company will be subtracted from the amount you can deduct on your taxes. If you do not have insurance coverage for the type of loss you experienced – or if you choose to not file a claim – you can only deduct the portion of the loss that wasn’t covered by your insurance policy.
If you have personal property that has experienced damage – or that has been completely destroyed or devastated – by any of the following three types of catastrophes, you may be able to deduct a portion of your loss from your federal income tax bill:
You have to deduct your loss for the tax year it occurred unless you live in a presidentially-declared disaster area. If that is the case, you can deduct the loss on your federal income tax return for the year prior to the event.
Assuming your loss is covered under a “qualifying event” and you’ve filed a claim with your insurance company, how much could you potentially deduct? To determine the value of your destroyed, damaged or stolen item(s):
If you’ve had multiple items stolen, damaged, or destroyed due to a qualifying event, determine the loss on each individual item and then add them together for a total loss amount.
The final number you arrive at in number 4 is the amount of your loss. But just because you’ve calculated your loss doesn’t mean you can deduct it. You’ll have to figure out how much of that loss you can deduct from your taxes.
If the casualty or theft affected your personal use of the property (meaning not for business use) there are two limits to how much you can deduct:
Supporting your claim is a lot easier if you can find any before and after photos of the lost/damaged/destroyed items. Also valuable are receipts, canceled checks, deeds, and, professional appraisals. A professional appraisal can provide you with an accurate estimate of the value of your items and serve as evidence for your insurance claims (and the appraisal fee can be deducted from your taxes).
If you need help determining your potential write-off, consult IRS Publication 584 “Casualty, Disaster and Theft Loss Workbook.” That publication can help you determine your eligibility for deduction, and your state income tax department can provide guidance on federal and state guidelines … or you can let TurboTax  or H&R Block  Online handle it.
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 homeowners insurance: http://www.thewisdomjournal.com/Blog/insurance/#homeowners-insurance
 This year I used TurboTax – the #1, best selling tax software!: http://www.thewisdomjournal.com/Blog/go/turbotax.php
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