Advertisement
Tax Breaks

Natural Disaster Losses May Not Be Tax Deductible

But some states are stepping up to help vulnerable homeowners.

In past years, one small comfort for people who suffered the wrath of Mother Nature was that the tax code allowed deductions for losses from a flood, hurricane, tornado, fire or earthquake that weren’t reimbursed by insurance, including your deductible. But if your home is damaged by a natural disaster this year, you may no longer be able to deduct your losses.

Starting in 2018, you can take the deduction only if the loss was caused by a federally declared disaster. You may still qualify for the break if your home is damaged by a major hurricane, for example, but not from a smaller fire or storm. The change was included in the tax overhaul that took effect January 1. Most states follow the federal law, so you may lose out on a state tax break, too. Some states could eventually change their laws to offer the break for losses resulting from a state of emergency declared by the governor, says Rocky Mengle, senior state tax analyst with Wolters Kluwer Tax & Accounting.

Advertisement - Article continues below

Even if you qualify, the calculation is complicated. You must itemize your tax deductions, which fewer people will do now that the standard deduction was nearly doubled, and you can only deduct losses that exceed $100 plus 10% of your adjusted gross income.

Advertisement
Advertisement - Article continues below

Your state may offer ways to pay for the cost of preparing for a natural disaster, which will reduce the need for the deduction. Several states, including Alabama, Mississippi and South Carolina, offer “catastrophe savings accounts,” in which you can set aside money to pay your insurance deductible or cover uninsured losses. Contributions are deductible from state taxes. Some states and localities offer grants to help pay for home improvements that will protect your home from disasters. The Strengthen Alabama Homes Program provides grants of up to $10,000 for homeowners in two coastal counties to fortify their roof against storms.

Insurers in many states provide premium discounts for storm-mitigating home improvements, such as storm shutters, using certain roofing materials, or having your home built to a stronger building code.

Several states offer sales tax holidays for emergency-preparedness items. Virginia’s tax holiday is August 3 to 5 and exempts portable generators and several other items from the state’s 5.3% sales tax. (For more information on state sales tax holidays, see What a Deal!)

K8-AHEAD.1.indd
K8-AHEAD.1.indd

Getty Images

Advertisement

Most Popular

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)
tax deadline

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)

Between due dates for IRA or HSA contributions, paying estimated taxes and other deadlines, there's more to do by July 15 than just filing your federa…
July 10, 2020
Know Why Your Credit Score Changes: 9 Money Moves to Consider
credit & debt

Know Why Your Credit Score Changes: 9 Money Moves to Consider

Your credit score is a key indicator of your financial well-being and of the risk you pose to lenders. How good is yours?
July 10, 2020
65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020

Recommended

Saver's Credit: A Retirement Tax Break for the Middle Class
Tax Breaks

Saver's Credit: A Retirement Tax Break for the Middle Class

Your retirement contributions could be the key to a lower tax bill.
July 9, 2020
8 Ways You Might Be Cheating on Your Taxes
taxes

8 Ways You Might Be Cheating on Your Taxes

Don't fall into these common traps that can get you in hot water with the IRS.
July 8, 2020
2020 Tax Deadline: When Are Tax Returns Due This Year?
tax deadline

2020 Tax Deadline: When Are Tax Returns Due This Year?

The April 15 deadline for filing your 2019 federal income tax return (and paying taxes) has been moved back...but the new due date is approaching fast…
July 8, 2020
How to Get an Extension for Filing Your Tax Return
tax deadline

How to Get an Extension for Filing Your Tax Return

If you can't wrap up your tax return by the July 15 deadline, it's easy to buy yourself more time.
July 7, 2020