As people along the East coast continue to clean up from superstorm Hurricane Sandy, it's a good time to review the tax laws and provisions the IRS provides to help taxpayers and businesses recover financially from the impact of a natural disaster. Nothing is more important than getting life back to normal, but a few best practices while you clean up and get everything fixed, might give you some much needed tax benefit and a bigger refund.
If you were impacted by Hurricane Sandy or are a victim of the recent wildfire in Oklahoma, or a separate disaster this calendar year, you may be eligible for a special tax treatment that allows you to claim your disaster on your 2011 tax return. If you aren't able to claim your 2012 disaster now, there are a number of things you can begin doing in order to prepare for next year's tax deadline, starting with these five tips:
- Know what's not covered. Several costs related to a disaster are not considered deductible losses. These include the cost of repairing damaged property, restoring landscaping to its original condition and cleaning up after a casualty. However, if these expenses meet certain conditions such as an expense incurred to restore your property to its original condition, you may be able to use these costs as a measure of the decrease in fair market value of your property. Damage from routine wear and tear, such as termites, is also not a deductible loss.
Unfortunately, natural disasters, and losses from them, occur each year and will continue to impact people's lives, causing personal and financial loss, and in some cases, even severe financial and economic loss. The income tax rules may provide for a small silver lining if the right circumstances apply. There are potential tax deductions, filing delays, extensions of time and other provisions that may help reduce your taxes, get money back, or get money back faster if you are severely impacted. However, as with all best practices to make the most of your tax situation, you need to plan ahead, understand the rules or get help in doing so, and document all of the facts and circumstances as much as you can and as detailed as you can. First and foremost, be safe and protect yourself and your family. After the storm or disaster event, secure your situation and start to get life back to normal. If you have a catastrophic loss, start looking at the income tax return implications and make the most of the rules to get more money back.