Spotlight on Elderlaw
As we are all too aware, in October 2012, “Super Storm Sandy” hit the east coast and caused billions of dollars in property damage to countless families and their homes. While many are still dealing with the aftermath of the storm, it is important to be aware of certain tax deductions, to which you may be entitled as a result of damage caused by Sandy. Even though April 15th has passed, it is not too late to amend your return to claim your losses.
Homeowners, as well as businesses, may claim what is known as a casualtyloss deduction on their returns in order to recoup some of the losses not covered by insurance. If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss or you will be unable to deduct this loss as a casualty. In the event that a homeowner did not obtain an extension to file a return, an amended return may still be filed in order to take advantage of these deductions.
What is a casualty loss? The Internal Revenue Service, in IRS Publication 547, defines such a loss as the result of sudden, unexpected or unusual causes, including those resulting from a fire, storm or car accident. An individual may claim an itemized deduction if he or she suffers a casualty loss to personal property, but only with respect to the portion of the loss for which the individual will not be compensated by insurance. Additionally, you must be able to demonstrate not only that the loss was a direct result of the casualty, but also that you were the owner or otherwise liable for the property at the time of casualty. Proof of money spent to restore the property to its pre-storm condition may be sufficient to show the difference in fair market value before and after the casualty. You must be able to provide paid invoices from licensed contractors and cancelled checks from your bank.
If you have already filed your 2012 return, your return can be amended showing your casualty losses and potentially get you back some of the money you didn’t get back from your insurance claims. In order for you to file an amended return, you will need to contact your tax preparer or call a licensed tax preparer who is familiar with Super Storm Sandy Casualty losses. One such local preparer, Vincent R Cervone of VRC and Associates is a local tax preparer who is well versed in the tax laws and has recently been published in The NY Times and The NY Daily News regarding these issues.
In order to calculate your losses and potential the tax preparer will need a copy of your 2012 tax return as well as the list of contents in your house that were lost or damaged during the storm. Vincent recommends that you download and print IRS Publication 584 which provides a workbook to help you compile and organize your list of items. You will need to provide your original cost basis as well as the fair market value (FMV) before and after Super Storm Sandy.
The accountant may also recommend an appraisal or a letter of value from a licensed appraiser to show what your house was worth before the storm and after the storm. The difference is considered a casualty loss and may be taken as a loss on your tax return. The loss can be considered a Net Operating Loss or NOL and can be carried back 3 years and ahead 20 years which may cover all the losses you incurred and even result in return for your losses.
If you feel that you could benefit from these tax deductions, you should consult with a tax professional prior to making any decisions. The attorneys can be reached at 718-738-8500.