With floods, tornadoes, hurricanes, earthquakes, and other natural disasters affecting so many people throughout the US this year, many have been left wondering how they're going to pay for the cleanup or when their businesses will be able to reopen. The good news is that there is some relief for tax payers--but only if you meet certain conditions. Recovery efforts after natural disasters can be costly. For instance, when Hurricane Irene struck last year causing widespread flooding, many homeowners were not covered because most standard insurance policies do not cover flood damage. Tax Relief for HomeownersFortunately, personal casualty losses are deductible on your tax return as long as the property is located in a federally declared disaster zone AND these four conditions are met:
1. The loss was caused by a sudden, unexplained, or unusual event.
2. The damages were not covered by insurance.
3. Your losses were sufficient to overcome reductions required by the IRS. Second, you must reduce the amount by 10 percent of your adjusted gross income (AGI) or adjusted gross income. For example, if your AGI is $25,000 and your insurance company paid for all of the losses you incurred as a result of flooding except $3,100 you would first subtract $100 and then reduce that amount by $2500. The amount you could deduct as a loss would be $500.
4. You must itemize. Tax Relief for Homeowners and BusinessesThe IRS often provides tax relief for those affected by natural disasters such as the individuals and businesses impacted by the recent severe storms, flooding, landslides and mudslides in Colorado. The tax relief postpones certain tax filing and payment deadlines to Dec. 2, 2013. It includes corporations and businesses that previously obtained an extension until Sept. 16, 2013, to file their 2012 returns and individuals and businesses that received a similar extension until Oct. 15. It also includes the estimated tax payment for the third quarter of 2013, which would normally be due Sept. 16.Certain taxpayers in the counties of Adams, Boulder, Larimer and Weld will receive tax relief, and other locations may be added in coming days following additional damage assessments by the Federal Emergency Management Agency (FEMA). If you've been affected by a natural disaster, please call our office. We'll help you figure out when your tax payments are due. Tax Relief TipsThe IRS also states that you have two options when it comes to deducting casualty losses on your tax returns. You can deduct the losses in the year in which they occurred or claim them for the prior year's return. So if you were affected by a natural disaster this year you can claim your losses on your 2013 tax return or amend your 2012 tax return and deduct your losses. If you choose to deduct losses on your 2012 tax return, then you have one year from the date the tax return was due to file it. Confused about whether you qualify for tax relief after a recent natural disaster? Give us a call. We'll help you figure out the best way to handle casualty losses related to hurricanes and other natural disasters. |