These are damages that occur to your home, household possessions or vehicles. Casualty losses occur when sudden events such as floods, earthquakes and fire damage this type of property (normal wear and tear does not count as casualty loss).
There is also a separate category of loss that applies in the case of a federally declared natural disaster. Theft is the deprivation of one’s money or property, but it must be proven. The theft must illegal under the laws of the state in which it occurs, and criminal intent must be shown.
When these types of losses occur, they may be claimed as deductions on your taxes, but only if proper procedure is followed.
This process consists of three general steps:
Schedule A to the tax return form 1040 may be used to list itemized deductions. Tax Form 4684 may be used to report casualty and theft losses.
Losses are generally deductible for the year in which you sustained the loss. This rule is different for losses sustained in a federally declared disaster area, and is described below.
Adjusted basis is usually the amount the property cost you, plus any improvements you have made to it while you’ve owned it, and less any depreciation of value or insurance reimbursements you receive following a loss.
If you have a tax deductible casualty loss from a disaster in an area that was officially designated by the President of the United States as eligible for federal disaster assistance, you can choose to deduct that casualty loss on your tax return for the tax year immediately preceding the casualty loss tax year. This means you may want to revise the previous year’s tax return.
If you have been affected by a presidentially declared disaster, you can ask the IRS to delay collection of tax you owe and to eliminate tax penalties and interest.
You can also request copies or transcripts of previous years' tax returns from the IRS. This can assist you in getting some money back from the IRS.
Tax law is a very complicated and frustrating subject. To make matters worse, tax law changes every year. A local tax attorney can help you understand current tax law and how it affects your income tax problem. If you have questions regarding the deductibility of your expenses, or if you need to go to tax court, an attorney can represent you and help minimize your income tax bill.
Last Modified: 07-25-2018 05:58 PM PDTLaw Library Disclaimer
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