During a March snowstorm, I lost five oak trees
that were between 60-70 years old each'Can I write this loss off on my taxes?
If so, what do I do?
Determining a loss value for the trees themselves may be difficult, or even impossible, unless you purchased the trees yourself (in which case the original cost of the trees will be part of your deduction), or unless you can prove that the cost of the property when you bought it included a particular amount that was attributable to the value of the trees'However, the cost of removal of the trees, and the cost of repairing any damage they might have caused during the storm qualifies as a deductible casualty loss, if you itemize your deductions on Schedule A'Here's the way it works:
First, you should be aware that you are expected to file an insurance claim for any loss that is insurable'For example, if a falling tree damaged part of your home, you would file a claim with your homeowner's insurance company'Or, if your insurance will help pay for the cleanup of the storm damage, you must file a claim'Only the part of the loss that is not covered by insurance qualifies for a deduction'Even if you decide not to file the insurance claim, because you think it might raise your insurance rates, you must still reduce your deductible loss by the amount of the insurance coverage that exists.
Expenses related to the loss but not directly caused by the loss are not deductible'For example, if a tree fell on your car and you needed to rent a car while yours was being repaired, the cost of the repairs beyond your car insurance coverage will be deductible, but the cost of the car rental will not.
You will need to obtain a Form 4684, "Casualties and Thefts," which you will attach to your tax form when you file in the spring'The amount of loss calculated on this form is the amount you will carry over to your Schedule A for itemized deductions'If a second casualty occurred during the year (for example, if your car was stolen, or if a fire wiped out your garage), you will file a separate Form 4684 for each loss.
On Form 4684, you will enter a description of the loss, (for example, "downed trees" or "roof damage"), as well as the location of the damage (your address), the date of the storm, and a brief description of the cause of the damage ("winter storm" is sufficient).
When filling out the loss form, you will be asked for particulars about the cost of the items damaged, the amount of insurance reimbursement you received, and the fair market value of the damaged items at the time of the loss'Herein lies the first rub: the amount of your deductible loss is determined by the lesser of the basis of the property damaged or the fair market value of the property'So, if you owned a storage shed that cost $1,000, and it was completely downed by the trees, and the value of the shed was $2,000 in the current market, your maximum loss for the shed is $1,000.
In the case of cleaning up the debris from the trees and removing the trees themselves, the deductible amount is the amount you pay to the tree removal crew'Clean up the mess yourself and there is no deduction.
There is a second area in which the attractiveness of a casualty loss is diminished'The loss must exceed $100 or the IRS doesn't want to even hear about it'And, finally, the deductible portion of the loss is the amount by which the loss exceeds 10% of your adjusted gross income.
So, say you had a loss of $10,000'Nice deduction, right? Well, let's see'Perhaps you received $6,000 in insurance reimbursement'Now your $10,000 deduction is down to $4,000'Take off $100, an arbitrary amount that the IRS uses to reduce every casualty loss'So your deduction has dwindled to $3,900'If your adjusted gross income is $36,000, you reduce your casualty loss deduction by 10%, or $3,600'That juicy $10,000 deduction just turned into a meager $300'So much for the generosity of the IRS