Tax Breaks

Tax Tip: How to Deduct Property Damage Caused by Hurricane Zeta

Get the maximum tax deduction for property losses resulting from Hurricane Zeta or other natural disasters.

If you live in Hurricane Zeta's path, your family's personal safety is your number one concern during the storm. But once the hurricane has passed, your primary concern might be dealing with property damage from high winds or flooding. If that's the case, the tax law can offer some help.

Personal casualty losses of individuals are deductible to the extent that they are attributable to a federally declared disaster area. This encompasses areas devastated by hurricanes, earthquakes, major flooding, blizzards, tornadoes, wildfires and other events.

If your house, car or belongings are damaged or destroyed as a result of a federally declared disaster, you may qualify for a tax break to offset losses that aren't covered by insurance when you file a claim.

Generally, only taxpayers who itemize deductions can take a tax write-off for damage to personal property. And there are two important offsets that apply. First, you must reduce the amount of the loss by $100. Then, you can deduct the balance only to the extent that it exceeds 10% of your adjusted gross income (AGI).

Let's say your AGI is $100,000 and you have $30,000 in unreimbursed losses from damage to your house caused by Zeta. You first subtract $100 from the loss. Then you subtract $10,000 (10% of your AGI) from the $29,900 balance. The remaining $19,900 is the amount you can deduct on Schedule A of Form 1040. (More liberal rules apply for taking the deduction for 2018 and 2019 federally declared disasters.)

To compute and report casualty losses, you need to fill out IRS Form 4684. You must enter the FEMA disaster declaration number on that form. Find a list of federally declared disasters and the declaration numbers at fema.gov/disasters.

The IRS offers multiple safe harbors to make it easier for qualifying taxpayers to figure the loss to their damaged home or personal belongings. For example, one method lets a homeowner with losses of $20,000 or less take the lesser of two repair estimates to determine the decrease in the home's value. Homeowners can also use the estimated loss in reports prepared by an insurer or a licensed contractor's invoice. See IRS Publication 547 for more safe harbors.

The tax law allows you to take a personal disaster loss on your return for either the year of the disaster or the year before the disaster. For example, if your home is damaged from Hurricane Zeta, you can take the loss on your 2020 return or on your 2019 return. If you decide to claim it for 2019 and you have already filed your 2019 return, you can amend it by filing Form 1040X. For this purpose, you must file your amended prior-year return no later than six months after the due date for filing your current-year return (without extensions) for the year in which the loss took place. So, for Hurricane Zeta losses, you would need to file an amended 2019 return by October 15, 2021.

Note that shortly after a major federally declared disaster, the IRS will often offer administrative relief, such as granting additional time to file tax returns or pay taxes. You can also call 866-562-5227, the IRS's dedicated phone line for disaster-related questions.

For more information on tax help available to people impacted by Hurricane Zeta, see Tax Relief for Hurricane, Wildfire, Flood and Other Natural Disaster Victims.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
7 Best Commodity Stocks to Play the Coming Boom
commodities

7 Best Commodity Stocks to Play the Coming Boom

These seven commodity stocks are poised to take advantage of a unique confluence of events. Just mind the volatility.
September 8, 2021
Stock Market Holidays in 2021
Markets

Stock Market Holidays in 2021

Is the stock market open today? Take a look at which days the NYSE, Nasdaq and bond markets take off in 2021.
September 2, 2021

Recommended

Child Tax Credit Payment Schedule for the Rest of 2021
Tax Breaks

Child Tax Credit Payment Schedule for the Rest of 2021

The IRS has already sent three batches of monthly child tax credit payments. Here's when you can expect the rest of your payments.
September 16, 2021
What Are the Income Tax Brackets for 2021 vs. 2020?
tax brackets

What Are the Income Tax Brackets for 2021 vs. 2020?

There are seven different federal income tax brackets for your 2021 tax return – each with its own marginal tax rate. Which bracket you end up in for …
September 14, 2021
When Are 2021 Estimated Tax Payments Due?
tax deadline

When Are 2021 Estimated Tax Payments Due?

If you're self-employed or don't have taxes withheld from other sources of taxable income, it's up to you to periodically pay the IRS by making estima…
September 14, 2021
The RMD Solution to the Hassle of Filing Estimated Taxes in Retirement
required minimum distributions (RMDs)

The RMD Solution to the Hassle of Filing Estimated Taxes in Retirement

If you don't need the money to live on, wait until December to take your RMD and ask the sponsor to withhold a big chunk for the IRS.
September 14, 2021