Hurricane Sandy has left her mark. This included power outages, significant property damage and, sadly loss of life.
People are trying to pick up the pieces and put their lives back together. While there are clearly more pressing issues now, we’ll address a possible silver lining for some. How to take a casualty loss on your income tax return due to Hurricane Sandy.
You will need to complete IRS Form 4684, Casualties and Thefts, and attach this to your 2012 income tax return.
To calculate the loss you will need to know:
The cost or other basis of the property
Insurance or other reimbursement (whether or not you filed a claim)
The value of the property before the casualty
The value of the property after the casualty
There are limits to the tax deduction:
1) For Personal Use Property the first $100 is not deductible. Think of this as the deductible.
2) Individuals must itemize their deductions. Taxpayers can take the Standard Deduction or itemize their deductions, whichever is greater. For a married couple filing a joint return the Standard Deduction is $11,900 for 2012. To itemize your deductions complete Schedule A, Itemized Deductions. The primary categories of itemized deductions are:
* Medical
* Taxes (State Income and Property)
* Mortgage Interest
* Charitable Donations
* Casualty Losses
* Miscellaneous Itemized Deductions
3) An individual can only deduct the casualty loss if the loss exceeds 10% of their Adjusted Gross Income (“AGI”). AGI is located on the bottom of page 1 on Form 1040. For 2011 this was line 37.
Generally the loss must be declared in the year of the casualty. Many taxpayers will take this loss when they file their 2012 returns early next year rather than waiting until 2013.
Photo From Creative Commons
Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.
