June 21, 2024

Deducting Irene

Beacon Financial Plus
Leading Edge

After an earthquake and then Hurricane Irene, we would like to hope that all of you had no damage, but we know that is not the case. If you’re one of the unlucky ones who sustained damage to your home or property, this tax tip is especially for you. You may be eligible for a casualty loss deduction.

A casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire or earthquake. The loss must be reduced by any insurance or other reimbursement you receive or expect to receive. It is further reduced by $100 for each event and then by 10 percent of your adjusted gross income. You must itemize your deductions to take the loss.

For example, if a tree fell on your car and it was totally destroyed, the computation of your loss would be as follows:

A. Original Cost $30,000

B. Fair Market Value on date destroyed $15,000

C. Insurance Reimbursement $7,000

D. Adjusted Gross Income $75,000

Take the lower of A or B, (in this case B is $15,000); subtract C ($7,000); and the loss equals $8,000. For each event, subtract $100. Subtract 10 percent of D ($7,500). The deductible loss equals $400.

In this sample case, it hardly seems worth trying, but I’m sure there are a number of you with much larger losses. For more tax tips or to contact the Beacon office, come visit our web site: www.beaconplus.net.

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