If your property has been damaged or destroyed by a casualty, you
may be able to get a tax refund based on your unreimbursed loss.
A casualty is the damage, destruction, or loss of property resulting from
an identifiable event that is sudden, unexpected or unusual. Deductible casualty
losses can result from earthquakes, fires, floods, hurricanes, vandalism or
similar events.
If you do have a casualty loss, you first need to know the amount of your
loss. You need to know its adjusted basis before the casualty and the decrease
in its value due to the casualty. Normally, your loss is the smaller of these
amounts reduced by any insurance reimbursement you receive or expect to receive.
If you had insurance coverage at the time of the casualty, but did not file a
claim, you can deduct only the amount of the loss that the insurance would not
have covered. For business property completely destroyed, use its adjusted
basis, minus any salvage value and insurance reimbursements, as your loss. IRS
Publication 547, Casualties, Disasters, and Thefts (Business and Nonbusiness)
and Form 4684, Casualties and Thefts, gives you step-by-step instructions on how
to figure your loss.
For personal-use property, you must subtract $100 from each loss event,
and then subtract 10% of your adjusted gross income from the total casualty
losses for the year. The remaining loss is the amount you may include in your
itemized deductions.
If your loss is the result of a disaster in an area the President of the
United States has declared eligible for federal disaster assistance, you have a
choice of when to deduct it. You may deduct the loss on an amended return for
the tax year immediately preceding the tax year in which the disaster occurred
or you may wait until you file your tax return for the year of the disaster. If
you choose to file an amended return, you may get your refund sooner. But if
your income declines in the disaster year, you may have a larger deduction by
waiting, since you have to subtract 10% of your adjusted gross income in
figuring your loss.
For tax law information on casualties, disasters and thefts, get free
Publication 547, Casualties, Disasters, and Thefts (Business and Nonbusiness),
and Publication 1600, Disaster Losses, (1600SP in Spanish) by calling the IRS at
1-800-829-3676
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