Contributed by The Bonadio Group
After Hurricane Sandy and subsequent damage to the Northeast region, taxes are probably the last thing on your mind. However, with disasters comes property damage.
Generally, you may deduct casualty losses relating to your home, household items, and vehicles. It is important to know the rules on casualty losses caused by natural disasters to help protect your investments.
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.
Federally declared disaster areas qualify for disaster loss treatment. Casualty losses are generally deductible in the year the casualty occurred. However, if you have a casualty loss in a federally declared disaster area, you can choose to treat the loss as having occurred in the year immediately preceding the tax year in which the disaster occurred. This can be a great way to get immediate relief instead of waiting for the tax year to end.
- IRC §165 and Reg. Sec. 1.165-7
- IRS Publication 584, Casualty, Disaster, and Theft Loss Workbook