Losses; Declared Disaster Area


E

Eric Albrecht

Greetings,

Im have a question regarding the deductability of losses suffered
during a federally declared natural disaster. I have read IRS
Publication 547, but it did not really answer my question.

Here is the situation:

I suffered losses in a federally declared natural disaster (FEMA
disaster 1735 seen here http://www.fema.gov/news/event.fema?published=1&id=9172)

I do have property insurance and they reimbursed me after I payed my
deductible which was $2000. My question: Can I deduct from my taxes
this $2000 insurance deductible? Do the 10% rule or $100 rule apply
to this situation?

Kind Regards,
Eric
 
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R

removeps-groups

I do have property insurance and they reimbursed me after I payed my
deductible which was $2000. My question: Can I deduct from my taxes
this $2000 insurance deductible? Do the 10% rule or $100 rule apply
to this situation?
Yes, the $2000 you paid is deductible as a casualty loss, but subject
to the 10% of AGI plus $100 rule. Don't forget to deduct the change
in FMV of your home. I don't know if Congress ever lowers the 10%
rule in disaster areas (for example, saying that amounts above 5% of
your AGI are deductible), so check with a local tax preparer. Just to
be sure, the $2000 that you paid must be for repairing casualty loss,
not for something like fixing a damaged roof.

See page 5 of the publication 547

Example. Your home was extensively dam-
aged by a tornado. Your loss after reimburse-
rent from your insurance company was
$10,000. Your employer set up a disaster relief
fund for its employees. Employees receiving
money from the fund had to use it to rehabilitate
or replace their damaged or destroyed property.
You received $4,000 from the fund and spent
the entire amount on repairs to your home. In
figuring your casualty loss, you must reduce
your unreimbursed loss ($10,000) by the $4,000
you received from your employer's fund. Your
casualty loss before applying the deduction lim
its (discussed later) is $6,000.
 

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