With one of the largest storms in U.S. history having hit Florida, you probably aren’t thinking about your taxes. However, give this five minutes now and it could save you thousands later because hurricane-related losses can be deductible on your tax return — if you follow the rules and provide the appropriate documentation.
Losses are claimed on IRS form 4684, Casualties and Thefts, where casualty is defined as, “the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual.” Irma definitely fits that description.
You must be able to prove your losses, so having photos, or video, of everything you own is critical both before and after the storm. Taking a panoramic video of each room in your home or business is a great way to record what was there and what condition it was in before the storm.
Make sure to take photos outside as well since damage to signs, vehicles, vessels, sheds and landscaping may also be deductible. Also take photos when you return so that the damage and/or loss can be substantiated.
You will need to show your basis in the property, so make sure to gather up any proof of purchase receipts, put them in zip-lock bags and take them with you when you evacuate.
Like everything else in the tax code, claiming casualty losses can be complicated, but taking these steps right before and after the storm is the basis of a good claim. In addition, there are often special rules for taxpayers in Presidentially Declared Disaster areas and that is likely to be the case here.
For additional information on casualty and theft losses, see IRS form 4684 or Publication 547. You can also seek assistance with your claim from an #EnrolledAgent or federally-licensed tax professional, through the National Association of Enrolled agents using www.eaTax.org.
One final thing on natural disasters: They have a way of bringing out both the best and worst in people. While these events often unite us, they also create opportunities for scammers to take advantage of the well-intentioned.
If you are giving money to hurricane-relief, make sure it is a qualified charity and ask for a receipt for your contribution. To verify the legitimacy of a charity use the "EO Select Check" tool, formerly known as IRS Publication 78, on irs.gov.
Best of luck with the storm and let us know how we can be of assistance. To stay up-to-date on these and other changes follow us on Twitter — @TropicalTax. We are proud to be recognized by Forbes magazine as one of the 100 must-follow tax twitter feeds for 2017.
Jerry Gaddis is Founder & CEO of Tropical Tax Solutions, a full service firm headquartered in Key Largo offering Tax Consultation, Preparation and Representation services. Mr. Gaddis, a Dave Ramsey Endorsed Local Provider, is Enrolled to Practice Before the Internal Revenue Service and a Fellow in the National Tax Practice Institute. He earned degrees from the University of Florida and the Crummer Graduate School of Business at Rollins College in Winter Park, FL. He’s been in the tax business since 2004 and you can reach him at www.TropicalTax.com .