Losses in Disaster Areas That are Eligible for Federal Assistance

hurricane irma destruction
Jodi Jacobson_istock_hurricaneirmadestruction

I’ve written several articles about legislation enacted in September that authorizes special tax breaks for qualifying individuals who suffer losses in disaster areas that are eligible for federal assistance.

This time around, let’s discuss some murky distinctions.

In some situations, a damaged residence might be in close proximity to a disaster area but not actually within the officially designated area. In that case, the deduction for a casualty loss can be claimed only on the return for the year of the loss and not on the return for the prior year. This is so even though the damage was attributable to the same event that resulted in an official designation for the neighboring area.

For example, in August 2004, Hurricane Charley initially came ashore in Florida at Sanibel Island, located in Lee County and just outside of Fort Myers. Then, it immediately ricocheted off Sanibel and moved into Port Charlotte, located in Charlotte County. While President Bush declared Charlotte County a disaster area, he didn’t do so for Lee County. Consequently, tax breaks for disaster losses were unavailable to Lee County property owners, though their losses might have been just as devastating as those suffered by their Charlotte County neighbors.

Outlays to Protect Against Casualty Losses

Long-standing rules deny deductions for preventive measures taken to avoid damage to property by floods, storms and the like.

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About Julian Block

Julian Block

Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com


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