When you live in a region affected by a natural disaster, dealing with the practicalities of cleanup and rebuilding are just the first steps when it comes to getting life back to normal. You may also face significant financial burdens in the form of home repairs or rebuilding, vehicle repairs or replacement, and personal property loss.
The good news is, if you live in a federally declared disaster area, you may qualify to deduct the value of personal property lost, damaged, or destroyed as a result of that disaster. This value is referred to as the “casualty loss” of your property.
To calculate casualty loss of personal property after a disaster, the IRS advises one of two approaches:
- Assess the cost of your item in relation to its fair market value. The lesser amount is the amount you can deduct as the casualty loss.
- Assess how much value your item has lost due to damage caused by the disaster. The amount of the decrease in value is the casualty loss.
If you file, or plan to file, an insurance claim for any loss or damage, you cannot take both the casualty loss deduction and the insurance settlement. You must reduce your casualty loss deduction by the actual or estimated amount of insurance money you receive.
To find out more about casualty loss, give the tax experts at Taxation Solutions, Inc. a call today. We’re here to help folks in Charlotte and the surrounding area understand casualty loss and other disaster-related tax matters.