Emergency question from a reader:
“Help, Kim, my house is involved in the Sylmar fire. What is the tax relief for disaster victims?”
My answer: Good luck and above all be safe! The Federal government offers relief to those of us who are suffering from uninsured property damage. To see if you can qualify for the write-off, the damage must be caused by an unexpected, identifiable event, such as a flood, earthquake, hurricane, tornado, etc. This is an aside but make a note that accidents and deterioration of property don’t count.
In this case, the fire sounds that it definitely would count.
Your uninsured loss, minus $100, must then exceed 10% of your adjusted gross income to qualify.
You will need to run the numbers to see if you can claim the casualty loss deduction.
If you can claim the casualty loss deduction, be prepared to provide the IRS:
1. An estimate of your loss, which could involve getting appraisals for the value of your property before and after the damage.
2. Background data about the disaster that caused your loss, such as newspaper clippings.
3. Proof you own the damaged property.
4. Receipts for repairs.
5. Make sure that you remove any costs that you have been reimbursed for by insurance companies.
Please remember that if your loss is in a federally declared disaster area (and that may be deemed as such by the government depending on how bad things get), you have the option of deducting the loss on your tax return for the year immediately before the disaster. If you choose that option, enter your adjusted gross income from the prior year instead.
For more on claiming the deduction, see IRS Publication 547, Casualties, Disasters and Thefts, and IRS Publication 584, Casualty, Disaster, and Theft Loss Workbook.
Good luck!
Kim Greenblatt
Kim Greenblatt’s profitable blog answers a plea for help on what tax relief is for disaster victims.