Middle Tennessee's recent floods have caused a tremendous amount of property damage.  Individuals have had homes, vehicles and other personal property damaged or destroyed by these floods.  In many cases a large portion of the damage or loss may not be covered by insurance.  If your insurance does not cover or fully compensate your loss, you may be entitled to a federal casualty-loss tax deduction.

If you are located in a federally declared disaster area, it may be to your advantage to file a casualty loss on your 2009 federal income tax return.  If you have already filed your 2009 federal income tax return, you can file an amended tax return to take advantage of the more liberal 2009 tax rules.

 

 

If you suffer a loss from a disaster in an area declared by the President as warranting federal assistance, you may deduct the loss either on the return for the year of the loss or on a return of the prior year.

 

 

In 2009, there are some liberal provisions that do not currently carry over to 2010.

 

If a taxpayer resides in a county that is declared a federal disaster area and elected to claim the disaster loss on a 2009 return, the following rules apply:

 

1.)  The property must be personal use property.  (There are different fules for

       business and income producing property.)

2.)  The damage must have been due to the 2010 flood.  If the damages were

       not related then different rules apply.

3.)  You can claim the disaster loss whether you itemize or not.

4.)  You must file an insurance claim if the property was insured.  If you do not

       file a claim there are restrictions on the amount of loss that can be claimed.

5.)  The 10% of adjusted gross income reduction for casualty losses is eliminated.

6.)  Your total loss is reduced by any insurance proceeds received.

7.)  The total loss is reduced by $500.

 

In order to determine the deductibility of the loss, you should attempt to document the following:

 

1.)  Original cost of the damaged property

2.)  Any amounts spent on improving the property prior to the disaster

3.)  The decrease in the fair market value of the damaged property

4.)  Any insurance reimbursements received as a result of these damages

 

If your property is only partially damaged, you should still establish the value of the property before and after the disaster.

 

If we can be of service to you, please feel free to contact us.