A Tax Write-off for Storm Damage
Victims of Tropical Storm Fay might be able to deduct losses that aren't reimbursed by insurance.
My house got hit by Tropical Storm Fay and insurance is going to pay for most of the damages. But my windstorm deductible is $5,000. Can I deduct that amount on my tax return?
It depends on your income. Unreimbursed losses are deductible -- if you itemize deductions -- and that includes your policy deductible and any storm-related damage not covered by insurance. But you have to cross a steep threshold before such casualty losses become tax deductions
First, you need to reduce your unreimbursed loss by $100, then reduce the remaining amount by 10% of your adjusted gross income.
For example, if your adjusted gross income is $40,000, then you can only deduct unreimbursed losses above $4,000 (10% of your AGI). So if your insurer didn't cover $5,000 of the loss, then you can deduct only $900 ($5,000 unreimbursed loss minus $100 = $4,900, then subtract $4,000).
These types of losses are generally tax-deductible in the year they occur -- so you'd need to wait until you file your taxes to report the loss. But if you live in a presidentially declared disaster area, you usually have the option of filing an amended return right away -- which could get you a refund check in a few weeks -- or waiting to file with your return the following April. Several Florida counties affected by Tropical Storm Fay have been declared presidential disaster areas, and more may receive that designation soon. Federal and state officials are currently conducting damage assessments of counties in northern Florida to determine their status. Refer to the Florida Division of Emergency Management's State Emergency Response Team page at FloridaDisaster.org for updates.
Also see the IRS's Tax Relief in Disaster Situations page for details about specific disasters and general information about the tax rules. The IRS's Disaster Assistance and Emergency Relief for Individuals and Businesses also provides more information and details about the deductions for casualty, disaster and theft losses.
For more information about dealing with hurricanes and floods -- and preparing your home and finances to withstand disaster -- see Lessons From the Floods about the Midwest floods in June, Before (and After) a Disaster Strikes and Protect Your Home Before Disaster Strikes.