Disasters are part of our lives and we cannot plan a way out in order to save ourselves from them. But as far as your taxes are taxes are concerned, IRS is an unexpected source of help which most of us don't know. However, in order to take advantage of these tax deductions, you need to contact the IRS and fill out certain extra paperwork.
What will be considered as a casualty by the IRS?
Well, in order to qualify for the tax deductions, you need to meet the IRS tax deductibility guidelines. As the IRS guidelines, a casualty can be described as “the damage, destruction or loss of property which takes place due to a sudden, unexpected or unusual event”. Such casualty can arise due to natural or man-made disasters. It should be noted here that the IRS won't consider lost property, termite damage, etc. as a casualty. The IRS will consider burglaries, thefts, earthquakes, fires, hurricanes, vandalism, tornadoes, mudslides, floods, ice storms, blizzards, droughts, etc. as casualties.
How will be the deduction amount figured out?
Once you find out that the casualty that you have gone through is allowable for tax deductions, you need to find out how much can be deducted. The IRS has 2 limits:
1. You should reduce your loss amount by $100.
2. The remainder amount must be greater than 10% of your adjusted gross income.
Apart from this, you also need to subtract any insurance money which you have got for the loss.
In order to figure and report your loss, you will require Form 4684. Apart from this, you will also require Schedule A to itemize your loss deduction. You will have to attach both these forms to your individual income tax return Form 1040.