Sioux Falls, SD
We've seen the powerful punch that Mother Nature can pack in KELOLAND. From floods to tornadoes, your property can be devastated in a matter of minutes. But if you had weather damage, you may be able to deduct it on your taxes.
We all saw the terrible devastation several homeowners in Shindler experienced from flooding in late July.
"I've lost four cars, a business and a house in four days and its starting all over again today. I don't have a whole lot more to lose," Mark Long said in July of 2010.
Mark Long and his neighbors may not have had flood insurance to cover the damage, but they can take a tax deduction.
"A tornado, a hailstorm, a snowstorm, a flood for example," Shane Ferguson of the Internal Revenue Service said.
While major flooding in Shindler is one example of casualty loss, smaller unexpected catastrophes can also qualify, but you have to be able to itemize.
"In addition to that, then you also have to meet a threshold in excess of 10 percent of your adjusted gross income. Also, it needs to be reduced for the amount you get for insurance and in addition to that there's a small $100 rule that you take 100 dollars off of each occurrence. They call it the IRS rule," Ferguson said.
Figuring out how much you can deduct is quite the process, that's why the IRS publishes a 145 page workbook.
"It will walk you through that particular process in terms of what's my initial cost of it, fair market value of it, both before and after casualty, how much I got for insurance, and then you get to the bottom line of how much I can actually deduct for casualty loss," Ferguson said.
Casualty loss is deductible in the year it happens, unless it's in a federally declared disaster area.
"And that other option is that you can take a look and see if it's more beneficial for you to file an amended return for the previous year. You don't have that option unless federally declared disaster is declared," Ferguson said.
And you don't have to provide proof of the damage to the IRS, such as photos or video, but in case you're audited, you'll want documentation.
"It's not something you're going to send in with your tax return, but if we ever come back and ask, it's a good idea to have it," Ferguson said. IRS