When disaster strikes, it can have a devastating impact on your everyday life and your financial future. However, the IRS does allow you to deduct casualty losses from your tax return in certain scenarios. Casualty loss is defined as the damage, destruction, or loss of property due to an identifiable event—such as an earthquake, fire, flood, hurricane, tornado, or even theft—that is sudden, unexpected, or unusual. In most cases, you’ll deduct the casualty loss from the tax return the same year the loss occurs. However, if you’re in a presidentially designated disaster area, you may be able to deduct the amount from the previous year’s return.
Of course, the fact that casualty losses are unanticipated means it can be hard to pinpoint exactly how much you’ve lost. That’s why it’s a good idea to periodically inventory your belongings by taking a photos of the interior and exterior of your property, especially if you live or work in an area that’s at risk for severe weather. Once the worst has happened, you’ll determine the deductible amount for each item lost by comparing its cost with its fair market value; the lesser amount will be deductible.
Dealing with financial matters after a disaster, accident, or burglary can be frustrating and overwhelming. Luckily, Taxation Solutions, Inc. is standing by to assist you. We offer tax help throughout Virginia Beach and the surrounding region, and we’re casualty loss experts. Get in touch today to discuss your situation!