I have previously written about some extended tax due date relief granted to victims of Hurricane Helene (and any federally declared disaster).
I want to now provide a brief overview of losses that may be deducted on your tax return related to these disasters. If any of my clients believe they may have losses that qualify, please ensure you let me know during tax preparation.
Here's some bullet points:
Donations to "go-fund-me's" or directly to people are wonderful and helpful, but unfortunately your cost of these items or cash given is generally not tax deductible. Only donations to 501 (c) orgs is deductible. For business clients, we can see if these can be deductible via the "ordinary and necessary" marketing related gift giving or other business related expense
An affected taxpayer does not have to be one who actually lives or works in the zone. They can be deemed affected if their records were located there
Victims should keep an organized "workbook" of everything damaged or lost, backed up by receipts
If you have insurance, file a claim so you can prove to other assistance givers that you tried insurance first
$ help you receive from FEMA and other orgs, for loss of personal property is generally not subject to tax
IRS Publication 547 will be a helpful tool
Rev-Proc 2018-08 (safe-harbor) can be used if the loss is related to 100% personal use home and personal property. Any business or rental use cannot use this
Generally, a deductible loss will be the difference in fair market value before and after the loss, reduced by $ gotten from insurance, FEMA etc.
Taxable income may occur if funds received exceed the calculated loss. This is particularly common with business property, due to tax depreciation
For personal use personal property, the loss is generally replacement value less 10% per year of each year the property lost was owned
This is just a high-level quick list of things to consider, so be sure to keep and organize all records related to any disaster losses, so your deductions can be maximized. I know it is frustrating to go through the loss itself, but then have to go through the difficulty of the work required in getting related tax breaks. Hopefully I can make the process a bit easier.
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