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Tax Aspects Of Hurricane Sandy
Posted By Joseph S. Reisman On November 8, 2012 @ 12:30 pm In News & Features | 3 Comments
Telling Tips  is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
My family, staff, and I hope that you and your families are safe. I am happy to say that my electric is back, the internet is working, the water is out of my basement, the fallen tree is out of the driveway, and my heating system is about 75 percent fixed.
As Mark Twain said, “Kindness is the language which the deaf can hear and the blind can see.” This storm has brought many people together — family, friends, and neighbors — and has brought out the best in you. New York is a great place to live, because of you.
Before I tell you the tax aspects, here are a few things you need to be doing:
What Are The Tax Rules If You Don’t Have Insurance?
Your loss may be deductible. Personal casualty losses include hurricane, tornado, flood, fire, vandalism, and theft.
These casualty losses are computed on Form 4684, and the loss is then transferred to Schedule A of the Form 1040 as an itemized deduction.
Now The Tax Law Steps In:
From the amount in Step 4, first deduct $100, and secondly, deduct 10 percent of your adjusted gross income, which is found on Form 1040, page 1, line 37.
For example, if the property you lost originally cost $50,000, but you have owned it for 20 years, its fair market value may have decreased to $35,000. Due to the storm, it became worthless. Your property loss is $35,000. You now subtract $100 to reduce the loss to $34,900, and finally subtract 10 percent of your adjusted gross income (AGI). If your AGI was $100,000, then 10 percent would be $10,000, and your loss on form 4684 would be $24,900 ($34,900 – $10,000).
What Are The Tax Rules If You Are Partially Insured?
Insurance proceeds (received, expected to be received, or could have been received if you filed a claim) reduce the amount of the casualty loss as computed above. Therefore, if the insurance amount was $20,000, your taxable loss would be $4,900.
What Are The Tax Rules If You Make A Profit?
If the insurance company (unexpectedly) gives you more that the basis of the property, the gain will be taxable unless you purchase a replacement property.
Some Good Tax News
As our area has been declared a federal disaster area, you can file an amended tax return (1040X) for 2011 and claim this deduction now instead of waiting until you file your 2012 tax return. On the top of the form, you should write the words “Hurricane Sandy.” You should receive this expedited refund in about 60 days.
I don’t have all of the answers, but give me a call with any questions.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website .
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URL to article: http://www.sheepsheadbites.com/2012/11/tax-aspects-of-hurricane-sandy/
URLs in this post:
 Telling Tips: http://www.sheepsheadbites.com/tag/telling-tips/
 the firm’s website: http://www.taxhelp1040.com/
 “I’m From The Government And I’m Here To Help.” And Other Myths.: http://www.sheepsheadbites.com/2013/01/im-from-the-government-and-im-here-to-help-and-other-myths/
 Tax Aspects Of Hurricane Sandy: Part II: http://www.sheepsheadbites.com/2013/01/tax-aspects-of-hurricane-sandy-part-ii/
 It’s Officially Tax Season — Here’s An Earned Income Credit Checklist: http://www.sheepsheadbites.com/2013/01/its-officially-tax-season-heres-an-earned-income-credit-checklist/
 2013 1231 Charitable Contributions – No IRS Wiggle Room: http://www.sheepsheadbites.com/2013/01/2013-1231-charitable-contributions-no-irs-wiggle-room/
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