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2/4/2013 12:48:53 PM
Although no tax break will heal the heartbreak Hurricane Sandy left behind, taxpayers whose homes and personal belongings were damaged or destroyed will get some relief.
See Also: The Most-Overlooked Deductions
But there's a limit to how much you can deduct. You must first subtract $100 from the amount of your loss. After that, your deduction is limited to the amount of losses that exceed 10% of your adjusted gross income. For example, if your AGI is $100,000 and your unreimbursed losses total $20,000, you'd be allowed to deduct $9,900. The 10% threshold was waived for Hurricane Katrina victims; lawmakers from New York, New Jersey and Connecticut have proposed the same relief for Sandy victims.
If losses occurred in a presidentially declared disaster area -- which is the case for most Hurricane Sandy victims -- you can claim them in 2012 or 2011. That gives you the flexibility to claim the loss in the year in which you had the lower AGI. If you claim it for 2011, you'll need to amend your tax return.
Be prepared to provide estimates of the value of your property before and immediately after the disaster. Records from your mortgage lender and state property tax office could provide proof of improvements and repairs to your home. For furniture and other personal property, Web sites such as eBay can help. Be realistic: A big disconnect between your income and inflated personal-property claims will raise a red flag, says Judy Strauss, an enrolled agent in Cobleskill, N.Y., whose clients include victims of Hurricane Irene. "The IRS will know that's not reasonable," she says.