What Expenses From a Natural Disaster Are Tax-Deductible?

If a disaster destroys your home or property, the IRS offers some relief.

If a disaster destroys your home or property, the IRS offers some relief.

When a natural disaster strikes, the result can be devastating, not only emotionally but also financially. The Internal Revenue Service sympathizes with taxpayers who lose property due to natural disasters. In the form of a tax deduction, the IRS allows you to claim the property that you lost on your income taxes. You must itemize to receive the deduction, but the extra trouble is worth it if the loss due to a natural disaster exceeds the amount of your standard deduction.

Disaster Area

After enduring a disaster, filing your income taxes is possibly the last thing on your mind. When you are a victim of a federally declared disaster, you have the option to claim the loss on your previous year's income tax return, which provides you with much-needed cash. The IRS will prioritize the processing of your income tax return ahead of other taxpayers and get you the cash as fast as possible. To claim the loss on your previous year's tax return, you must file an amended return using Form 1040X.

Tax-Deductible Property

The IRS allows you to deduct the loss of real property and personal property when a disaster destroys your home. According to the IRS, real property includes your land, vegetation growing on the land, your home, your garage and anything attached to your home, such as plumbing, well pump or light fixtures. Personal property is anything movable on your land or in your home, including your car, clothes, furniture and paintings.

Claiming the Deduction

To claim a loss of property, you must determine the fair market value of each structure and item lost by the disaster. Generally, the IRS treats the land, structures and vegetation as one item. If you received help from a government agency, such as the Federal Emergency Management Agency, or a payment from your insurance agency, you must deduct this amount from the fair market value. If any of the property was salvageable, you must also deduct the salvage price from your loss.

$100 and 10 Percent Rule

After calculating your casualty loss, you must reduce the remaining amount by $100. This reduction applies to each casualty loss or event, not per item. Generally, you will have to deduct this amount only one time. In addition, you must also deduct 10 percent of your adjusted gross income from the loss. After making these reductions, the remaining amount of your loss is the amount of your deduction. If you elect not to claim the loss on your previous year's income tax return, use Form 1040 to prepare your taxes and Schedule A to report the loss.

Non-Deductible Expenses

The IRS does not accept the cost of appraisals or photographs as part of your loss. If the cost of these expenses exceeds 2 percent of your adjusted gross income, you can claim the costs as a miscellaneous deduction on Schedule A. The cost to repair damaged property and the cost to clean up after a disaster is not part of a casualty loss; however, you can use the cost to measure the decrease in the item's fair market value.


About the Author

Angela M. Wheeland specializes in topics related to taxation, technology, gaming and criminal law. She has contributed to several websites and serves as the lead content editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and criminal justice. She has owned and operated her own income tax-preparation business since 2006.

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