Thursday, July 26, 2012
Taxes: How to Deduct Weather Damages
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Taxes: How to Deduct Weather Damages
When severe weather conditions unexpectedly cause damage, from minor to irreparable, the IRS allows you to claim a weather-related casualty loss for the damaged property. The damage has to happen all at once, such as a tornado or lightning strike. Gradual unchecked water damage, on the other hand, does not qualify as a casualty loss event and does not qualify for the deduction.
There are specific steps to follow and qualifications to meet when claiming a weather damage tax deduction.
Step One: Calculating the Loss Amount
The first step in claiming a weather-related casualty loss deduction on your taxes is calculating the loss amount you can declare. This step is the most complex and must be done correctly.
Follow these steps to correctly calculate the loss amount:
Your weather-related casualty loss deduction should be filed using form 4684. The form can be downloaded on the official website of the IRS. You should use that form to detail the loss and take the claim as an itemized deduction on your Schedule-A tax filing. The IRS does not require you to provide any documentation or proof of the damage.
However, it is also prudent to keep careful records of damage you are claiming a casualty loss deduction on.
Step Three: Claim the Same Year
A weather-related casualty loss has to be claimed as a deduction the year the damage occurs. The only allowable exception to this rule is if your damaged property is in an area designated as a disaster area by the federal government.
Damage done to property during sudden inclement weather can be claimed as a deduction on your taxes. Careful math and proper filing make claiming this casualty loss deduction much easier to accomplish.
Teresa currently works for a company that provides tax relief services to companies and individuals. For more information on her services, visit her website today.
When severe weather conditions unexpectedly cause damage, from minor to irreparable, the IRS allows you to claim a weather-related casualty loss for the damaged property. The damage has to happen all at once, such as a tornado or lightning strike. Gradual unchecked water damage, on the other hand, does not qualify as a casualty loss event and does not qualify for the deduction.
There are specific steps to follow and qualifications to meet when claiming a weather damage tax deduction.
Step One: Calculating the Loss Amount
The first step in claiming a weather-related casualty loss deduction on your taxes is calculating the loss amount you can declare. This step is the most complex and must be done correctly.
Follow these steps to correctly calculate the loss amount:
- Find the “fair market value” of the property both before and directly after the damage. This is what an interested party would be willing to pay for the property.
- Determine the “adjusted cost basis.” This figure is found by adding any capital improvements made to the property to the initial cost and subtracting the depreciated value.
- Next, subtract any insurance or other payments you have or are scheduled to get for the loss.
- The IRS requires you to subtract $100 for every casualty loss incident that happened in a given year. Subtract that amount from the lesser of the two figures you arrived at in the previous two calculations.
- Finally, subtract 10% of your AGI (adjusted gross income). The amount you are left with is the loss you can claim in the deduction
Your weather-related casualty loss deduction should be filed using form 4684. The form can be downloaded on the official website of the IRS. You should use that form to detail the loss and take the claim as an itemized deduction on your Schedule-A tax filing. The IRS does not require you to provide any documentation or proof of the damage.
However, it is also prudent to keep careful records of damage you are claiming a casualty loss deduction on.
Step Three: Claim the Same Year
A weather-related casualty loss has to be claimed as a deduction the year the damage occurs. The only allowable exception to this rule is if your damaged property is in an area designated as a disaster area by the federal government.
Damage done to property during sudden inclement weather can be claimed as a deduction on your taxes. Careful math and proper filing make claiming this casualty loss deduction much easier to accomplish.
Teresa currently works for a company that provides tax relief services to companies and individuals. For more information on her services, visit her website today.
This post was written by: Franklin Manuel
Franklin Manuel is a professional blogger, web designer and front end web developer. Follow him on Twitter
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