Tax Deductions
Tax deductions
The IRS can help in disastrous times

Then you have to figure out the "real money" value of your deduction. Deductions don't directly translate into tax dollars saved, so a casualty deduction of $5,000 won't get you a five-grand refund. Rather, deductions reduce your taxable income. The less taxable income you have, the smaller your tax bill. After you determine your casualty loss deduction, you must refigure your taxes using the new taxable income amount to see just how much of a refund you'll get.

Making your claim

Victims in presidentially declared disaster areas -- regions hit especially hard by hurricanes, tornadoes, floods, earthquakes or other calamities -- get special consideration. Tax laws make it easier for affected folks to get some help from the IRS more quickly.

In these cases, taxpayers typically can claim their losses in the tax year the disaster struck, or they can claim it as if it happened the year before. Many taxpayers find that by filing an amended return and claiming the loss for the previous tax year, for example, claiming 2011 wildfire losses on an amended 2010 return, they get a bigger refund. This often is the case for individuals who didn't itemize deductions the prior year.

The deadline for choosing the option of which tax year to claim disaster losses usually is the due date of your current-year return. This means you can file the amended return for the previous year by the filing deadline for the year in which the disaster actually occurred.

For example, if in 2011 you suffered a casualty loss due to a presidentially declared disaster, you can amend your 2010 return up until the current April filing due date (the 17th this year) to claim the losses in that prior tax year.

FEMA maintains a list of current- and previous-year presidential disasters to help you confirm that you're eligible for special tax treatment.

Yes, the paperwork is a hassle. But the IRS provides additional details in Publication 547, Casualties, Disasters and Thefts. The agency also has a workbook to help you track your losses, as well as Publication 2194, Disaster Losses Kit for Individuals, which consolidates the tax-related disaster information you'll need.


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