Property loss from disasters can be tax deductible
Brenda Procter, M.S., Consumer and Family Economics, College of Human Environmental Sciences, University of Missouri-Columbia
Uninsured disaster victims may recoup some of their losses by filing proper tax forms because property losses from natural disasters are tax deductible.
Personal property that has been damaged extensively should be appraised soon after the disaster. A professional estimate of value will serve as evidence for casualty loss claims. Remember that the appraisal fee is deductible.
For disaster victims who itemize deductions on their federal tax return, casualty losses may be deducted. But losses must be reduced by any salvage value or insurance award plus $100 on personal losses. The total of all losses is further reduced by 10% of a taxpayer's adjusted gross income. In addition, the deduction is limited to the cost basis or the fair market value at the time of the disaster, whichever is less.
Proper record keeping is crucial for disaster victims who file property loss tax forms. MU consumer and family economics specialists say disaster victims will need to do the following to demonstrate loss:
- Note the kind of disaster, when it occurred and that the damage was a direct result of the disaster.
- Show you are the owner of the damaged property.
- Find a record listing the cost of the property and show the cost of any improvements.
- Have appraisals showing fair market value before and after the disaster.
- Show proof of any insurance benefits or other compensation received including free repairs, restoration and clean up from any disaster relief agencies.
There are several records that serve as good supporting evidence for casualty claims, including before-and-after photographs, receipts, canceled checks, deeds, purchase contracts and professional appraisals.
For more information about casualty losses and deduction limits, taxpayers should refer to IRS Publication 547, Casualties, Disasters, and Thefts, and Publication 584, Casualty, Disaster, and Theft Loss Workbook. Additional information is also available on the IRS web site at www.irs.gov.
Last update: Tuesday, May 05, 2009
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