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Can You Get Tax Relief from Hurricane Damage?

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The IRS sometimes offers hurricane tax relief in the face of major hurricanes like Ida and Dorian. Working with the IRS can be complicated, making it advisable to work closely with an experienced hurricane damage attorney.

Are Hurricane Losses Tax Deductible?

If a hurricane causes your personal belongings or your home to be damaged, you may be able to claim what is known as a casualty loss deduction on your tax return that year. A casualty loss refers to any extraordinary property damage in the sense that it is sudden, unexpected, or unusual – the way damage from a hurricane is.

In other words, casualty loss differs from the normal wear and tear your home and property are likely to experience over time. For the tax years from 2018 to 2025, any hurricane damage tax reduction must be related to a federally declared disaster, which means that the president authorizes federal disaster assistance for a specific area.

Deducting Your Hurricane Losses

The IRS typically allows hurricane-related casualty loss deduction only in those storms in which the following apply:

  • High waters and severe flooding
  • Heavy rains
  • Unusually severe winds
  • Additional hurricane-related damage

The deduction you can take on your taxes for storm-related losses amounts to writing off expenses related to your home or personal-use property as determined by the lesser of the following two:

  • Adjusted basis – The original purchase price or value of the asset when you acquired it, along with any capital improvements
  • Economic loss – The difference between the property’s value immediately prior to the hurricane and immediately after

From here, you’ll need to determine the amount you can deduct. If the property in question is your home or another personal-use property, the following additional limitations apply:

  • Your casualty loss will be reduced by $100.
  • Your casualty loss will be reduced by 10 percent of your adjusted gross income (AGI). The lesser of these amounts will then need to be reduced by any reimbursements that are either received or anticipated.

If any loss remains, it can be itemized on your tax return.

The Burden of Proof for Deductions

In order to use the economic loss method, you’ll need to prove the value of your property immediately prior to and following the hurricane, which can be a tall order.

Ultimately, the burden of proof is on you. While this is generally less challenging for major items, such as your home and vehicle, it can be far more so when it comes to your overall loss in terms of personal belongings.

Turn to an Experienced New Orleans Bad Faith Insurance Attorney for the Help You Need

If your property damage claim is denied or reduced unfairly, the skilled New Orleans bad faith insurance attorneys at Insurance Claim HQ have the experience and legal insight to skillfully advocate for a just resolution that affords you the bad faith damages to which you are entitled. For more information, consider contacting us today.

 

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.

 

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