After a natural disaster occurs, your top priorities are going to be making repairs to your home and staying safe. Once you’ve gone through the process of getting your home repaired and filing all the necessary insurance claims, though, it’s important that you start considering the potential tax impacts. Specifically, you can get tax help for hurricanes, floods, wildfires and other types of disasters.
Here are a few examples of some of the types of tax help for floods available to disaster victims in Union City, NJ.
Obtaining deductions for lost or damaged property
Perhaps the most important tax break for victims of natural disasters is the casualty loss deduction for home damage. This deduction doesn’t just apply for damage done to the structure of your home—you can also apply it for damage done to personal belongings inside that home, or to vehicles you keep inside a garage.
In most cases, this deduction will be equal either to the adjusted basis or the decreased value of the property, whichever is smaller, minus your insurance proceeds.
There are some limitations and offsets you’ll need to be aware of before you seek this deduction in your taxes.
If you’re a person filing your taxes individually, any property loss or damage can only be deducted to the extent that it’s been attributable to a federally declared disaster. So, if the damage didn’t occur in a federally declared disaster area, you will likely be unable to qualify for the deduction. You will be able to access a list of federally declared disasters on the FEMA website.
In addition, you will need to itemize if you are to get deductions for disaster losses. Most people take the standard deduction instead these days, but if you’ve had significant damages as a result of a disaster, it may be better to itemize for that year’s taxes. You will need to file Schedule A with your tax return to write off any disaster-related losses. The only way you can write off these losses when taking the standard deduction is to claim them as business losses on Schedule C.
If you get insurance payouts or other types of reimbursement, you must take out the reimbursement amount as you calculate your loss, and will also need to subtract any reimbursements you have not yet received. If your property is covered by insurance but you don’t file a claim, then only the part of the loss not covered under your policy will be deductible on your taxes.
After you calculate the loss eligible for the deduction, you will also need to subtract $100 for every disaster, and 10 percent of your adjusted gross income. The remaining amount is the amount of money you’re able to deduct on Schedule A.
This process can be complicated, so if you have any further questions about getting tax help for wildfires, floods or hurricanes in Union City, NJ, we encourage you to reach out to the team of tax prep specialists at Kedean’s Generation today.
Categorised in: Tax Consultant