NEW TAX LAW BENEFITS
LAKE ONTARIO SHORELINE/FLOODING VICTIMS
A recent clarification on casualty losses specifically benefits those taxpayers on the shoreline of Lake Ontario in upstate New York who suffered uncovered or partially uncovered losses to their homes and personal property due to the recent flooding.
- The tax write off is known as a casualty loss. Under the new ruling, taxpayers who have been victims of Lake Ontario flooding, have the ability to take a deductible loss on their tax return. The loss is computed by the decrease in the fair market value of your home or personal assets which remain uncovered by FEMA or insurance policies. Under normal tax rules, the taxpayer would then reduce the loss by 10% of their adjusted gross income. However, under the new ruling, flooding losses need only be reduced for non-covered losses by $500. So, if a home had damages of $7000, not covered by insurance, even though the damage hasn't been corrected, once the $500 is deducted, the taxpayer has a write off of $6500! This is deductible even though the taxpayer doesn't itemize their deductions!
Better yet, taxpayers can AMEND their 2016 tax return or wait until they file their 2017! The deduction should be taken on whichever year saves the most money.
Taxpayers who had partially covered claims would reduce the loss by the reimbursement. So, a loss of $75,000 with a deductible of $40,000 where the taxpayer only received insurance coverage of $30,000 would give that person a casualty loss of $39,500 ($40,000 less $500). If this taxpayer is in the 25% tax bracket, their tax reduction would be $9875!
It is important that you document the estimated loss, all reimbursements and expected reimbursements. EG Tax specializes in this recent change in the tax law and can help with the casualty loss application on your return. Our 33 offices across Western New York are ready to assist you with navigating this beneficial change. For more information or to set up an appointment, call us at 716-632-7886, go online to www.egtax.com or download our app in the app store or google play.