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Tax Relief for Those Affected By Natural Disasters |
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 Homeowners Fortunately, 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.
Natural disasters such as
flooding, hurricanes, tornadoes,
and wildfires all qualify as
sudden, unexplained, or unusual
events.
2. The damages were not
covered by insurance.
You can only claim a deduction
for casualty losses that are not
covered or reimbursed by your
insurance company. The catch
here is that if you submit a
claim to your insurance company
late in the year, your claim
could still be pending come tax
time. If that happens you can
file an extension on your taxes.
Call us if you need help filing
an extension or have any
questions about what losses you
can deduct.
3. Your losses were
sufficient to overcome
reductions required by the IRS.
The IRS requires several
"reductions" in order to claim
casualty losses on your tax
forms. The first is that
effective December 31, 2009 you
must subtract $100 from the
total loss amount. This is
referred to as the $100 loss
limit.
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.
As it now stands, you must
itemize your taxes in order to
claim the deduction. If you
normally don't itemize, but have
a large casualty loss you can
calculate your taxes both ways
to figure out which one gives
you the lowest tax bill. Contact
us if you need assistance
figuring out which method is
best for your circumstances.
Tax Relief For Homeowners And Businesses
The 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 Tips
The 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.
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