casualty loss - Linkenheimer LLP CPAs & Advisors

Casualty Loss Tax Deductions May Help Disaster Victims in Certain Cases

This year, many Americans have been victimized by wildfires, severe storms, flooding, tornadoes and other disasters. No matter where you live, unexpected disasters may cause damage to your home or personal property. Before the Tax Cuts and Jobs Act (TCJA), eligible casualty loss victims could claim a deduction on their tax returns. But currently, there are restrictions that make these deductions harder to take.

What’s considered a casualty for tax purposes? It’s a sudden, unexpected or unusual event, such as a hurricane, tornado, flood, earthquake, fire, act of vandalism or a terrorist attack.

Many unable to claim a tax break

For losses incurred from 2018 through 2025, the TCJA generally eliminates deductions for personal casualty losses, except for losses due to federally declared disasters.

Note: There’s an exception to the general rule of allowing casualty loss deductions only in federally declared disaster areas. If you have personal casualty gains because your insurance proceeds exceed the tax basis of the damaged or destroyed property, you can deduct personal casualty losses that aren’t due to a federally declared disaster up to the amount of your personal casualty gains.

Claim a refund with a special election

If your casualty loss is […]

By Linkenheimer LLP|2023-10-04T17:51:20+00:00October 4th, 2023|casualty loss, disaster|0 Comments

You Can Only Claim a Casualty Loss Tax Deduction in Certain Situations

In recent weeks, some Americans have been victimized by hurricanes, severe storms, flooding, wildfires and other disasters. No matter where you live, unexpected disasters may cause damage to your home or personal property. Before the Tax Cuts and Jobs Act (TCJA), eligible casualty loss victims could claim a deduction on their tax returns. But there are now restrictions that make these deductions harder to take.

What’s considered a casualty for tax purposes? It’s a sudden, unexpected or unusual event, such as a hurricane, tornado, flood, earthquake, fire, act of vandalism or a terrorist attack.

More difficult to qualify

For losses incurred through 2025, the TCJA generally eliminates deductions for personal casualty losses, except for losses due to federally declared disasters. For example, during the summer of 2021, there have been presidential declarations of major disasters in parts of Tennessee, New York state, Florida and California after severe storms, flooding and wildfires. So victims in affected areas would be eligible for casualty loss deductions.

Note: There’s an exception to the general rule of allowing casualty loss deductions only in federally declared disaster areas. If you have personal casualty gains because your insurance proceeds exceed the tax basis of the damaged […]

By Linkenheimer LLP|2021-08-31T21:56:15+00:00August 31st, 2021|casualty loss, deduction, deductions, disaster, Fire Relief Info, tcja|0 Comments

IRS FAQ on Casualty Tree Loss

We’ve had a number of clients ask us questions since the wildfires on tree loss and what that means in terms of determining a casualty loss on property. Below is an FAQ from the IRS which should hopefully provide some good information. If you have any questions, feel free to ask your Linkenheimer CPA.

Q: How does a taxpayer determine a casualty loss from damaged trees and other landscaping on personal-use residential property when that loss is attributable to a disaster?

A: In determining the amount of a casualty loss from damage to personal-use residential property, trees and other landscaping are considered part of the entire residential property, and are not valued separately or assigned a separate basis, even if purchased separately.

To compute your casualty loss:

Determine your adjusted basis in the entire residential property before the casualty. Your basis is generally the cost of the property, adjusted for improvements and certain other events. For more information on determining your adjusted basis, see Publication 530, Tax information for First-Time Homeowners, and Publication 551, Basis of Assets

Determine the decrease in fair market value of the entire residential property as a result of the casualty.

From the smaller of these […]

By Linkenheimer LLP|2020-09-03T20:04:48+00:00December 7th, 2017|casualty loss, Community, irs|0 Comments

Loss of Income Due to Business Interruption

The North Bay fires have caused unprecedented losses and hardship for so many fellow Sonoma County residents and business owners. While the priority is to assess physical damages and rebuild, there is an element of the overall losses that can be overlooked: Loss of Income due to business interruption. This is defined as “A type of insurance that covers the loss of income that a business suffers after a disaster.” The income loss covered may be due to disaster-related closing of the business facility or due to the rebuilding process after a disaster.

At Linkenheimer LLP, we have many years of experience in assessing circumstances that have resulted in a Loss of Income. Our expertise in this area encompass: research, analysis, report writing, and when needed, testimony to support the positions taken.

If you or anyone you know who has been affected by the fires, and have experienced a Loss of Income, please contact Linkenheimer and we will be […]

By Linkenheimer LLP|2021-02-17T18:11:03+00:00December 1st, 2017|casualty loss, disaster, income tax|0 Comments

Casualty Loss Deductions for Natural Disasters

As a California resident, most of us probably know someone who has suffered some kind of property loss courtesy of an earthquake. The recent Napa earthquake that shook the North Bay is a good reminder that many might be eligible to claim a casualty deduction for your property loss if you suffer property damage during the tax year as a result of a sudden, unexpected or unusual event (such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption. A casualty does not include normal wear and tear or progressive deterioration.). The casualty deduction is also available if you are the victim of vandalism.

Generally, you may deduct casualty and theft losses relating to your home, household items and vehicles on your federal income tax return. You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement, and you reduce the loss by the amount of any reimbursement or expected reimbursement.

If your property is personal-use property or is not completely destroyed, the amount of your casualty loss is the lesser of:

The adjusted basis of your property, or
The decrease in fair market value of […]

By Linkenheimer LLP|2020-09-03T20:05:44+00:00October 21st, 2014|casualty loss, deduction, earthquake|0 Comments