Are you prepared for the worst? In addition to the personal toll, natural disasters have tax implications. Planning ahead can ease the stress. Here are some tips.
- What should you do before the disaster? Steps to take long before a disaster happens include capturing video and still images of your personal and business property and equipment, maintaining current backups of your data, and keeping copies of important documents in an easy-to-grab “go bag” that you can take with you in case of emergency evacuation.
Store your photographic images and electronic backups at an off-site location. “Cloud” storage — uploading digital data to servers in another location — can be a viable approach.
- What happens on your tax return after the disaster? You can claim casualty losses as an itemized deduction on your personal federal income tax return for costs that are not reimbursed by insurance or otherwise. Your deduction is allowable only for the amount of the loss that exceeds $100 per casualty and 10% of your adjusted gross income for the year.
Generally, you can deduct the loss in the year the disaster happens. There is an exception that lets you file an amended return and deduct the loss in the year before the disaster. You can make that election when the president pronounces your location a “federally declared disaster area.”
Different rules apply when the disaster affects your business or investment property. For example, you’ll typically have to account for depreciation you claimed on the property in prior years when calculating your loss.
For help in coping with casualty losses before and after the event, please contact our office. We’re here to help.