With less than two months left until tax day, taxpayers are sifting through their files to assess last year’s gains and losses. An often-overlooked deduction is unreimbursed property and casualty losses, according to the Insurance Information Institute (I.I.I.).
“If your home, car, boat or other expensive property was damaged by a fire, flood, vandalism or other sudden and unexpected disaster, you may be able to deduct a portion of the loss from your taxes,” said Jeanne M. Salvatore, I.I.I.’s vice president of Consumer Affairs.
To qualify for the deduction, these losses usually need to be substantial. If you were significantly underinsured or had a large catastrophe deductible — for hurricane damage, for example — you may have a sizable unreimbursed property loss. Losses can be caused by natural disasters or man-made ones such as vandalism, burglary, robbery or kidnapping for ransom.
“Generally, you can deduct the loss to the extent it exceeds 10 percent of your adjusted gross income, less one hundred dollars,” said Marc J. Minker, CPA/PFS of Mahoney Cohen & Company and member of the American Institute of Certified Public Accountants’ (AICPA) personal financial planning executive committee.
“If the property is used in a trade or business, slightly different rules apply, so it is important to ask your tax preparer for assistance, Minker noted.
If you think you might qualify for this deduction, collect all receipts, insurance statements, the police report (if appropriate) and other documentation and present it to your tax preparer to see if you qualify, said Salvatore.
Those who prepare their own tax returns should review the “Nonbusiness Casualty and Theft Losses” on the Internal Revenue Service Web site www.irs.gov and contact their state income tax bureau to learn more about both the federal and state guidelines for this deduction. Insurance information can be accessed at the I.I.I.’s Web site www.iii.org.
Additionally, the American Institute of Certified Public Accountants and the National Endowment for Financial Education (NEFE) have written and produced Disaster Recovery: A Guide to Financial Issues to help people affected by disaster minimize the financial impact of a disruptive event on their lives and well-being. The guide contains important tax information and is being distributed by participating local chapters of the American Red Cross across the United States. The guide can also be accessed via the Internet at www.redcross.org.
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