23 Dec NOT EVERY DISASTER ALLOWS FOR A CASUALTY LOSS TAX DEDUCTION
Many Americans have become victims of natural disasters in 2024. Wherever you live, unexpected disasters may cause damage to your home or personal property. What’s considered a personal casualty for tax purposes? It’s defined as damage from a sudden, unexpected or unusual event, such as a hurricane, tornado, flood, earthquake, fire, act of vandalism or terrorist attack.
Through 2025, you can deduct personal casualty losses only if you itemize on your tax return and the loss results from a federally declared disaster. There is, however, an exception to that general rule. Suppose you have personal casualty gains because your insurance proceeds exceed the tax basis of the damaged or destroyed property. In that case, you can deduct personal casualty losses that aren’t due to a federally declared disaster up to the amount of your personal casualty gains.
When to claim a refund
A special election allows taxpayers to deduct a casualty loss that’s due to a federally declared disaster on the tax return for the preceding year and claim a refund. You can file an amended return if you’ve already filed the relevant return.
This election must be made no later than six months after the due date (without considering extensions) for filing your tax return for the year in which the disaster occurs. However, the election itself must be made on an original or amended return for the preceding year.
Need help? Contact us with your questions.
If any topics covered in this newsletter raise questions or if there are other accounting or tax matters on your mind, Gates Kirby & Company is always happy to provide guidance tailored to your unique situation. Our team genuinely enjoys helping clients navigate these topics with confidence. We look forward to connecting with you soon.
- Gates, Kirby & Company.
Tax laws, regulations, and interpretations can change without notice. Due to changing tax laws the content may be considered historical. Newsletter articles provide no guarantee information are complete, accurate, or current. Readers should verify applicable rules by consulting official sources (e.g., IRS, Colorado Department of Revenue) and/or consult with Gates Kirby to review how the content in the article content may be applicable to your tax situation.