Publication 547 - Casualties, Disasters, And Thefts - Department Of Treasury

amended return for the tax year immediately

slides made it unsafe is treated as a casualty

5. Smaller of line 1 or

line 4 . . . . . . . . . . . $47,500

$3,000

preceding the tax year in which the disaster

loss from a disaster. The loss in value is the

6. Subtract estimated

happened. If you make this choice, the loss is

difference between your home’s FMV immedi-

insurance . . . . . . . .

– 0 –

treated as having occurred in the preceding

ately before the disaster and immediately after

7. Loss after

year.

the disaster.

reimbursement . . . . . $ 47,500

$3,000

Claiming a qualifying disaster loss on

How to deduct your loss in the preceding

8. Total loss . . . . . . . . . . . . . . .

$50,500

TIP

the previous year’s return may result in

year. If you choose to deduct your loss on your

9. Subtract $100 . . . . . . . . . . . .

100

a lower tax for that year, often produc-

return or amended return for the tax year imme-

10. Loss after $100 rule . . . . . . . .

$50,400

ing or increasing a cash refund.

11. Subtract 10% of

diately preceding the tax year in which the disas-

If you do not choose to deduct your loss on

$71,000 AGI . . . . . . . . . . . . .

7,100

ter happened, include a statement saying that

your return for the earlier year, deduct it on your

12. Amount of casualty loss

you are making that choice. The statement can

return for the year in which the disaster oc-

deduction . . . . . . . . . . . . . . .

$43,300

be made on the return or can be filed with the

curred.

return. The statement should specify the date or

dates of the disaster and the city, town, county,

Claiming a disaster loss on an amended

Example. You are a calendar year tax-

and state where the damaged or destroyed

return. If you have already filed your return for

payer. A flood damaged your home this June.

property was located at the time of the disaster.

the preceding year, you can claim a disaster loss

The flood damaged or destroyed a considerable

against that year’s income by filing an amended

amount of property in your town. The President

Time limit for making choice. You must

return. Individuals file an amended return on

declared the area that includes your town a

make this choice to take your casualty loss for

Form 1040X.

federal disaster area as a result of the flood. You

the disaster in the preceding year by the later of

can choose to deduct the flood loss on your

How to report the loss on Form 1040X.

the following dates.

home on last year’s tax return. (See How to

You should adjust your deductions on Form

•

The due date (without extensions) for filing

deduct your loss in the preceding year, later.)

1040X. The instructions for Form 1040X show

your income tax return for the tax year in

how to do this. Explain the reasons for your

Disaster loss to inventory. If your inven-

which the disaster actually occurred.

adjustment and attach Form 4684 to show how

tory loss is from a disaster in an area declared

•

you figured your loss. See Figuring a Loss, ear-

The due date (with extensions) for filing

by the President of the United States to be

lier.

the return for the preceding tax year.

eligible for federal assistance, you may choose

If the damaged or destroyed property was

to deduct the loss on your return or amended

nonbusiness property or employee property and

return for the immediately preceding year. How-

Example. If you are a calendar year tax-

you did not itemize your deductions on your

ever, decrease your opening inventory for the

payer, you ordinarily have until April 15, 2005, to

original return, you must first determine whether

year of the loss so that the loss will not be

amend your 2003 tax return to claim a casualty

the casualty loss deduction now makes it advan-

reported again in inventories.

loss that occurred during 2004.

tageous for you to itemize. It is advantageous to

itemize if the total of the casualty loss deduction

Revoking your choice. You can revoke

Home made unsafe by disaster. If your

and any other itemized deductions is more than

your choice within 90 days after making it by

home is located in a Presidentially declared dis-

your standard deduction. If you itemize, attach

returning to the Internal Revenue Service any

aster area, your state or local government may

Schedule A (Form 1040) and Form 4684 to your

refund or credit you received from making the

order you to tear it down or move it because it is

amended return. Fill out Form 1040X to refigure

choice. However, if you revoke your choice

no longer safe to live in because of the disaster.

your tax on the rest of the form to find your

before receiving a refund, you must return the

If this happens, treat the loss in value as a

refund.

refund within 30 days after receiving it for the

casualty loss from a disaster. Your state or local

revocation to be effective.

government must issue the order for you to tear

Records. You should keep the records that

down or move the home within 120 days after

support your loss deduction. You do not have to

Figuring the loss deduction. You must fig-

the area is declared a disaster area.

attach them to the amended return.

ure the loss under the usual rules for casualty

losses, as if it occurred in the year preceding the

Figure your loss in the same way as for

Federal loan canceled. If part of your federal

disaster.

casualty losses of personal-use property. (See

disaster loan was canceled under the Disaster

Figuring a Loss, earlier.) In determining the de-

Relief and Emergency Assistance Act, it is con-

Example. A disaster damaged your home

crease in FMV, use the value of your home

sidered to be reimbursement for the loss. The

and destroyed your furniture. This was your only

before you move it or tear it down as its FMV

cancellation reduces your casualty loss deduc-

casualty loss for the year. The President later

after the casualty.

tion.

declared the area to be eligible for federal assis-

Unsafe home. Your home will be consid-

tance. The cost of your home and land was

ered unsafe only if both of the following apply.

Disaster relief grants. Do not include

$134,000. The FMV immediately before the dis-

post-disaster relief grants received under the

•

aster was $147,500 and the FMV immediately

Your home is substantially more danger-

Disaster Relief and Emergency Assistance Act

afterward was $100,000. You separately figured

ous after the disaster than it was before

in your income if the grant payments are made

the loss on each item of furniture (see Figuring

the disaster.

to help you meet necessary expenses or serious

the Deduction, earlier) and arrived at a total loss

•

The danger is from a substantially in-

needs for medical, dental, housing, personal

for furniture of $3,000. Your insurance did not

creased risk of future destruction from the

property, transportation, or funeral expenses.

cover this type of casualty loss, and you expect

disaster.

Do not deduct casualty losses or medical ex-

no reimbursement for either your home or your

penses to the extent they are specifically reim-

furniture.

You do not have a casualty loss if your home

bursed by these disaster relief grants.

You choose to amend your previous year’s

is unsafe due to dangerous conditions existing

Unemployment assistance payments under the

return to claim your casualty loss for the disas-

before the disaster. (For example, your house is

Act are taxable unemployment compensation.

ter. Your adjusted gross income on your previ-

located in an area known for severe storms.)

ous year’s return was $71,000. You figure your

Qualified disaster relief payments. Qualified

This is true even if your home is condemned.

casualty loss as follows:

disaster relief payments are not included in the

Example. Due to a severe storm, the Presi-

income of individuals to the extent any expenses

Furnish-

dent declared the county you live in a federal

compensated by these payments are not other-

House

ings

disaster area. Although your home has only mi-

wise compensated for by insurance or other

1. Cost . . . . . . . . . . . . $134,000

$10,000

nor damage from the storm, a month later the

reimbursement. These payments are not sub-

county issues a demolition order. This order is

ject to income tax, self-employment tax, or em-

2. FMV before disaster

$147,500

$8,000

based on a finding that your home is unsafe due

ployment taxes (social security, Medicare, and

3. FMV after disaster . . 100,000

5,000

to nearby mud slides caused by the storm. The

federal unemployment taxes). No withholding

4. Decrease in FMV

(line 2 − line 3) . . . . . $47,500

loss in your home’s value because the mud

$3,000

applies to these payments.

Page 12

Publication 547 - Casualties, Disasters, And Thefts - Department Of Treasury - 2004 Page 12

Related Articles

Related forms

Related Categories