Experts estimate that Hurricane Sandy has caused $50 billion of damage. Eqecat Inc., a financial advisory firm out of Oakland, California predicts that insurance will cover $10 to $20 billion of such losses. Storm victims will be on the hook for the other $30 billion of losses.
A couple of points to keep in mind before talking about the casualty loss tax implications:
- If your house is damaged from this disaster, contact local building authorities to see if the home is inhabitable,
- Establish an insurance claim, but don’t settle immediately,
- Make temporary repairs and take other remedial action to prevent further damage to homes and belongings, and
- Take photos of the damages.
With so many lives in complete turmoil, many of us on the East coast crushed by Sandy’s wrath are not thinking of claiming a casualty loss for tax purposes. However, knowing about how taxpayers can claim tax deductions under casualty loss provisions of the Internal Revenue Code is essential in dealing with insurance companies. While memories are fresh and evidence is still available, now is the time to develop, document and support such casualty losses.
To aid those affected by this devastation readers should look at my article entitled Casualty Losses For Hurricane Sandy. This article details the tax qualification rules for being eligible for casualty losses. It is a must read for anyone devastated by Sandy.