- 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

How to Buy a Car

How to get the best deal and buy a car with confidence.

View Course »

How much house can I afford

Home buying 101, evaluating one of your most important financial decisions.

View Course »

TurboTax Articles

Video: Who Qualifies for an Affordable Care Act Exemption (Obamacare)?

The Affordable Care Act requires all Americans to have health insurance or pay a tax penalty. But, who qualifies for an Affordable Care Act exemption? Find out more about who qualifies for an exemption from the Affordable Care Act tax penalty, how to claim an exemption on your tax return and how the Affordable Care Act may affect your taxes with this video from TurboTax.

Video: How to Claim the Affordable Care Act Premium Tax Credit (Obamacare)

The Affordable Care Act Premium Tax Credit is a new refundable tax credit that can lower your monthly health insurance premiums. If you qualify for the tax credit, you can claim the Premium Tax Credit throughout the year to lower your monthly health insurance premiums, or claim the credit with your tax return to either lower your overall tax bill or increase your tax refund.

Deducting Summer Camps and Daycare with the Child and Dependent Care Credit

If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.

What Is Schedule H: Household Employment Taxes

If you hire people to do work around your house on a regular basis, they might be considered household employees. Being an employer comes with some responsibilities for paying and reporting employment taxes, which includes filing a Schedule H with your federal tax return. But even if you have household employees, filing Schedule H is required only if the total wages you pay them is more than certain threshold amounts specified by federal tax law.

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