Is Storm Damage Tax Deductible?
As we enter hurricane preparedness week and consider all of the various ways to get ahead of storm damage, it occurred to me to also think about what happens after severe weather damages your property. You can be the most prepared, have the proper insurance, and still end up with significant damage that is not reimbursable. I sincerely hope this does not happen to you but if it does, here is some insight on tax deductions due to storm damage. The deduction is called, the casualty loss deduction and was designed by the government to help taxpayers who suffer financial losses due to storm damage. Much like insurance coverage, the loss must be caused by an event that is sudden, unexpected, or unusual. Instances could include lightning, tornadoes, earthquakes, vandalism, riots, fires, floods, storms, hurricanes, volcanic eruptions, car accidents, and shipwrecks. The deduction does not include normal wear and tear or accidental damage like your cat jumping on your 60-inch flatscreen TV and knocking it to the ground. Let’s say storm damage causes $15k worth of damage to your home. Your insurance, either by an endorsement or adjustment, will cover $10k of it and reimburse you. What about the remaining $5k? You can use the casualty loss deduction and write off $5k of taxable income when you file. I am oversimplifying this of course for the sake of explanation, you would be wise to hire a tax professional to walk you through exactly how to use this deduction. Nonetheless, you are now aware that you can use this deduction, which I hope you do not have to, to help mitigate the financial loss caused by storm damage.