Deductible Losses and Superstorm Sandy
The thoughts and prayers of our nation are with those of you who are suffering because of this horrific storm. If you want to help, consider giving to one of the many charities responding to those in need.
If you have been affected by a CASUALTY or DISASTER loss, you may feel like it is the end of the world. You just want things the way they were. All over our country, year after year, we experience all sorts of heart-wrenching losses. You want to know: Is your loss TAX DEDUCTIBLE?
Internal Revenue Service defines a casualty as “damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected or unusual”. Sudden means swift, not gradual or progressive. Unexpected is not anticipated, not expected. Unusual is not a typical day-to-day occurrence.
Not every mishap is deductible. General wear and tear, lost property, damage due to accidental breakage, and similar events are not deductible.
When you’re in the midst of the storm, it is too late. Here is what you want to do now before you find yourself suffering from a casualty.
The Record Keeping
Make a list of what you lost. List your personal property. Do you even know what you lost? When did you acquire it? Did you buy it? Was it a gift? How much did you pay for it?
Make it easy on yourself. Make a list for each room. List the item, when you got it, and how much you paid for it. You’ll be surprised at how much stuff you have and how much money you have invested in your stuff.
In looking at your list you might think, oh, yeah! Oh, I forgot about that. You’ve got household furnishings, appliances, food in the refrigerator and freezer, canned goods in the pantry. Don’t forget the clothing for him, for her, for the children. Some of that clothing is on hangers. Some is in drawers. What is seasonal and in storage right now?
Next, take pictures of each wall in your house. Take closer pictures of each special item of value. Do this in every room. Walk through your front door, go to the next room. Include the entry way, the living room, the dining room, the kitchen, ALL the rooms of your house and the closets, basement, utility room, and garage.
DEDUCT means itemized deductions. But do you take the standard deduction? Your loss might not be a high enough dollar value to help save you tax. If not, save yourself the trouble of figuring it out. Be sure to consult with your tax advisor on your particular situation.
When do you take this deduction? If your loss is from a casualty, take the loss in the year the casualty occurred. If you have a loss from a federally declared disaster area, you may choose to claim your loss in the year of the disaster or in the year before the disaster. Check with you tax advisor if this is your situation.
It’s Not Fair!
Nobody ever said life was fair. There is nothing fair about suffering a loss.
This article just brushes the surface of this topic. For a little more information, listen to the archived recording of my internet radio show, Bullet Proof Your Taxes at http://rsrn.us/taxes. The program on Friday November 2, 2012 was all about casualty and theft losses. The best thing you can do for yourself today is get out that camera, that video recorder, that audio recorder and take that personal inventory.
To your lowest legal tax,
Nellie T Williams, EA