- Days left

Home Damaged by Hurricane Sandy? Get Some Tax Relief

×
storm damage from Hurricane Sandy

Hurricane Sandy will go down as one of the costliest storms in U.S. history, with millions of people suffering damage to their homes.

If you're one of the unlucky ones, you may face months of waiting for much-needed repairs and insurance reimbursements. And even after final insurance checks come in, you may find that you're still left footing a hefty bill.

But you might find some relief from an unlikely source: the IRS.

Casualty Losses and You

The tax laws allow taxpayers who itemize their deductions to get a tax break for losses they suffer from natural disasters. However, the way that the IRS defines a loss is different from what you might expect. Rather than looking at repair costs, the IRS defines a casualty loss as the amount by which the fair market value of your property decreased as a result of the storm.

Although IRS Publication 547 allows you to use repairs as a measure of the decrease in fair market value, you have to take into account any potential increase in value that results from work you have done on your home.

Once you've determined the amount of your loss, you can estimate your eventual deduction. For a home, you have to subtract $100 from your losses and then further reduce your deduction by 10% of your adjusted gross income on your tax return before listing the final amount as an itemized deduction. For business property, these limitations don't apply; you can deduct the full amount against your business income.

You Don't Have to Wait

By now, you might wonder if you'll have to wait until April to get any tax relief. The answer is no, because the areas hit by Sandy got a presidential declaration as disaster areas. As a result, you can go back and amend your 2011 tax return to deduct your casualty loss in order to get an immediate refund.

Of course, you may want to wait if the amount of your deduction will be higher or if you'll get more of a tax benefit from the deduction this year rather than last.

For more information about how casualty loss deductions work and the records you should gather and keep, be sure to check out the IRS website. In addition, tax preparer Jackson Hewitt has put together a disaster recovery guide to help lead you through the process of documenting your loss for IRS purposes.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger.


Increase your money and finance knowledge from home

Economics 101

Intro to economics. But fun.

View Course »

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

TurboTax Articles

What Are the Tax Penalties for Smokers?

Starting in 2014, the Individual Shared Responsibility provision of the Affordable Care Act made you responsible for having minimum essential coverage, or MEC, in health insurance. Otherwise, you need to be eligible for a health care exemption, or you could pay a penalty when filing your income tax return. This requirement for minimum essential coverage applies to smokers and nonsmokers alike. If you're not covered by an employer's health plan and are a smoker, you can go to the health care marketplace to find MEC. If you're still unable to comply, you may have a penalty applied.

5 Steps to Navigate the Healthcare Marketplaces

To navigate the Health Insurance Marketplace, you have to know what you want from a health plan. Have your previous plan handy to make comparisons, as well as household and income information. If this is your first health plan, be aware of your needs and know your tax situation. Eligibility depends on the size of your family and combined income from all sources.

What Is Form 8941: Credit for Small Employer Health Insurance Premiums

Small business owners who subsidize the cost of employee health insurance premiums may be able to get some of that money back by claiming the credit for small employer health insurance premiums on their taxes. Some of the eligibility requirements, however, limit the number of people a business can employ and the average annual wages they earn. Qualifying as a small employer can reduce your tax bill by the amount of the credit you report on Form 8941.

What Is Form 8911: Alternative Fuel Vehicle Refueling Property Credit

In light of rising gasoline prices and environmental concerns, consumers have become more receptive to buying cars and trucks that run on types of fuel other than gasoline. The U.S. government introduced a tax incentive to encourage the installation of facilities to store or dispense alternative fuels in 1992. That incentive has evolved into a tax credit that also applies to equipment that recharges electric cars. If you equipped your home or business to accommodate alternative fuel vehicles, you may be able to use Form 8911: Alternative Fuel Vehicle Refueling Property Credit to reduce your federal tax obligation.

What Is Form 8885: Health Coverage Tax Credit

The health coverage tax credit is a program in place for tax years from 2002 to 2013 to help eligible individuals and families by paying a portion of premiums for qualified health insurance programs. Since the legislation authorizing the credit expired in January 2014, tax returns filed in 2014 for the 2013 tax year represent the last time eligible taxpayers can claim the credit.

Add a Comment

*0 / 3000 Character Maximum

2 Comments

Filter by:
Steven J. Fromm

Great article here. For more on casualty losses your readers may be interested in
Hurricane Sandy: Tax Deductions For Casualty Losses at my blog at: http://frommtaxes.wordpress.com/2012/11/06/hurricane-sandy-tax-deductions-for-casualty-losses/ and also Casualty Losses For Hurricane Sandy at my website http://www.sjfpc.com/hurricane_sandy_tax_losses.html for more of the details and requirements for claiming such losses.
Hope this helps. Hope this helps.

November 21 2012 at 1:20 PM Report abuse rate up rate down Reply
garryangel

The deduction is based upon the Fair Market Value just prior to the loss minus the FMV just after the loss. Pay the $300 to $500 for the appraisal (it's deductable) to determine the values and submit the appraisal report with the return just to be safe. It worked for the Northridge Earthquake.in 1994.

November 05 2012 at 3:06 PM Report abuse rate up rate down Reply