Claiming Tax Deductions for Weather Damage

Home damaged by weatherDid your roof collapse under the heavy weight of the snow? Did lightning strike your guest house? You probably know that insurance can protect your home and possessions during damaging weather (which we've had a lot of this year), but did you know that you may claim tax deductions for weather damage?

Here are some key points that came out of a recent conversation with the IRS.Weather-Related Damages Must Meet the Definition of a Casualty Loss

As long as the weather-related damage meets the definition of a casualty loss -- which is something that happens suddenly and unexpectedly as opposed to something that happens gradually -- you can take the deduction. In other words, a roof that collapses because of heavy snow would meet the definition of a casualty; slow, gradual water seepage in a basement would not.

Determine the Loss Amount

Here's where it can get complicated. You have to know the Fair Market Value of your property before and immediately after the casualty (what a willing buyer would pay for it) as well as the Adjusted Cost Basis (property cost plus capital improvements, minus depreciation and other factors). Take whichever amount is lower, subtract insurance or other reimbursements received or expected to be received. Then subtract another $100 for each casualty that occurred during the year (the $100 rule, per IRS) and reduce the loss again by 10% of your adjusted gross income.

File Form 4684

Report the loss on Form 4684 (You can download this from irs.gov), and take it as an itemized deduction on your Schedule A. The IRS tells me that you do not have to provide any additional documentation -- such as photos or videos of the storm-induced damage -- but that you should always have this information filed away for backup purposes.

Take the Loss in the Year the Casualty Occurred

Casualty losses are deductible in the year in which they occurred -- unless the loss happens in a federally declared disaster area. In which case, you can elect to take the loss in the preceding year, submitting an amended return if you've already filed.

Search Homes for Sale
See photos of homes for sale in your area and across the country on AOL Real Estate

Tax Tips for Real Estate Agents and Brokers

Most real estate agents and brokers receive income in the form of commissions from sales transactions. You're generally not considered an employee under federal tax guidelines, but rather a self-employed sole proprietor, even if you're an agent or broker working for a real estate brokerage firm. This self-employed status allows you to deduct many of the expenses you incur in your real estate sales or property management activities. Careful record keeping and knowing your eligible write-offs are key to getting all of the tax deductions you're entitled to.

Read More

Brought to you by TurboTax.com

What is the Educator Expense Tax Deduction?

The Educator Expense Tax Deduction allows teachers and certain academic administrators to deduct a portion of the costs of technology, supplies, and certain training. Here’s what teachers need to know about taking the Educator Expense Deduction on their tax returns.

Read More

Brought to you by TurboTax.com

Self-Employed Less Than a Year? How to Do Your Taxes

Have you been self-employed less than a year? If you’re just starting out, it’s possible you worked at a job earlier in the tax year before making the switch to self-employment, or you’re working multiple jobs. In this case, you may have more than once source of income you’ll need to report on your income tax return.

Read More

Brought to you by TurboTax.com

Taxes for Grads: Do Scholarships Count as Taxable Income?

Heading off to college to broaden your horizons is exciting, but funding your education via scholarships? That's even better. Scholarships often provide a path to education that might not be feasible otherwise, which is why the Internal Revenue Service (IRS) can be generous in minimizing students' tax obligations. But sometimes scholarship money does count as income, and it’s better to find out now if your scholarship adds to your tax liability than to have a surprise later. Here’s how to decode your scholarship taxation.

Read More

Brought to you by TurboTax.com
Read Full Story
Your resource on tax filing
Tax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.