Hurricane Irma certainly packed a powerful punch in and around Polk County. The scars remain evident and unfortunately, repairs could take months for some. It also took a toll on wallets, but here’s some good news for taxpayers: those affected by the storm could recoup some of those financial losses through tax savings.
CPS Tax Manager, Holly Kelley, says “There’s an itemized deduction that could be available for those dealing with personal losses due to Hurricane Irma.” It’s called a casualty loss. If you also experienced theft during the storm, that loss could be included as well. You will need to complete a 4684 Form when filing your tax return. Kelley says keep in mind, the deduction is available for losses to your home, furniture, vehicle or boat. Unfortunately, there is no tax deduction for buying water, generators, and other necessities.
Everyone’s tax situation is unique, but here’s one scenario to give you some perspective. Kelley says, “Let’s say you have a $5,000 hurricane deductible and you’re already itemizing and in the 28% tax bracket. If you have water and roof damage around $6,600 dollars and meet all conditions of using repairs instead of the decrease in fair market value, then you could generate a tax savings of around $1,300 dollars.
Kelley says you need to let your CPA know some important numbers to get a deduction, such as the fair market value of your home or item, what you paid plus improvements and the amount of insurance proceeds received. She says the cost of clean-up or repairs can also be used as part of the decrease of fair market value if certain conditions are met, such as if the repairs are necessary to restore the property’s original condition.
Now is a good time to call your tax advisor so he or she can help you determine your potential savings. Casualty loss rules are complex and can change, so it’s important to get advice from an expert. If you’re eligible, remember it’s not money you can collect tomorrow. The savings will come once you file your 2017 tax return. If you have received FEMA assistance, it’s not taxable income and will not affect benefits from any other federal program.
Please feel free call our office if you have questions or concerns. If you’ve been affected by Hurricane Irma, our thoughts are with you and we hope life will return back to normal as quick as possible.