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Disaster declarations for Sandy

By Kay Bell · Bankrate.com
Tuesday, October 30, 2012
Posted: 12 pm ET

That didn't take long. On Tuesday morning, President Barack Obama declared several sections of New York and New Jersey as major disaster areas.

The declaration means federal money is available to people in the area.

In addition, it gives individuals the chance to possibly get some immediate tax relief.

Under a presidentially declared major disaster, folks in the affected areas have the option of choosing which tax year to claim their disaster losses.

Filers can amend their previous year's tax returns and claim the storm losses against last year's income. Or they can wait and claim the allowable damage amounts when they file their returns next year.

In superstorm Sandy's case, that means claiming qualifying casualty losses on a Form 1040X for 2011. Or claiming them on 2012's return.

Which is best? It depends.

If, for example, you claimed the standard deduction on your 2011 return and now have sustained damages serious enough to exceed that amount and they could produce a tax refund, it might be worth filing the amended return. That way you'll get the tax money this year to help you make repairs instead of next year.

If, however, your tax calculations show that you'll get a better tax result by waiting, then just gather all your storm-related documents and hold onto them until you can file your 2012 taxes early next year.

I've been through some hairy storms before, so I know that if you did incur damages from Sandy, taxes are not on the top of your to-do list today. But keep this filing option in mind if you end up in a major disaster area. The Federal Emergency Management Agency tracks the disaster declarations at its website.

When things calm down and you have to start dealing with the more mundane things again, check into whether you should file an amended return to claim your storm losses.

Meanwhile, stay safe and if you haven't already, find a way to call your mother and let her know you're OK!

Want the latest news on taxes and natural disasters, tax reform prospects, filing deadlines, IRS alerts and tax-saving tips? Subscribe to Bankrate's free Weekly Tax Tip newsletter.

You also can follow me on Twitter @taxtweet.

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