Casualty Losses? Call your CPA.
Blizzards in New York, Tsunamis in Hawaii, Flooding in Tennessee, and Tornadoes in Missouri – 2011’s destructive weather has made life difficult for individuals and business owners throughout the United States.
Although you can’t avoid the stress and pain of rebuilding after these disasters, some taxpayers may take solace in the fact that some of these casualty losses may be tax deductible.
Non-business casualty losses are deductible to the extent that they are not reimbursed by insurance. Generally, the loss amount is the lesser of the property’s tax basis or its decline in value, less any insurance proceeds received. The loss is then reduced by $100. The remaining amount in excess of ten percent of the taxpayer’s adjusted gross income is deductible. It is important to keep in mind that only individual taxpayers utilizing itemized deductions can claim a deduction for these non-business property casualty losses.
For business assets, the $100 and 10% of adjusted gross income offsets are not applicable. Taxpayers are not required to itemize to claim losses on business assets.
Taxpayers suffering losses in presidentially declared disaster areas are allowed the option to deduct 2011 casualty losses on either their 2010 or 2011 individual income tax returns. This special rule affords the taxpayer the opportunity to choose whichever tax year yields the greatest benefit.
To see a list of the presidentially declared federal disaster areas, please visit www.fema.gov/news/disasters.fema.