Victims of the 2016 Louisiana flood or February 2017 tornado in New Orleans may be eligible to receive tax benefits. Both businesses and individuals with uninsured or under-insured flood losses may take a Federal Tax deduction based on the prescribed valuation method for determining a casualty loss. Those who lie in a federally declared disaster area can often get a faster refund by claiming losses related to the disaster on the tax return for the previous year, usually by filing an amended return.
The maximum deduction for the casualty is the lesser of (i) the decline in value of the property before and after the event that gave rise to the casualty loss; or (ii) the property’s adjusted cost basis. The method of valuation is the difference between the fair market value (FMV) of the property immediately before and after the disaster and must be determined by a competent appraiser.
An appraiser can use an adjuster’s cost of repairs estimate (Replacement Cost Value) to supplement the loss value determination. Such repairs must be necessary, non-excessive, cannot repair more than the damage suffered, not exceed the value of the property before the casualty and must be completed. Individuals may deduct casualty losses to contents not covered by insurance, however, businesses cannot deduct contents losses (Furniture, Fixtures and Equipment). Expenses for removing debris and clean-up costs are part of the deductible casualty loss.
Jackson & Jackson’s experienced team of tax attorneys and claims management specialists stand ready to assist commercial clients with obtaining IRS casualty loss tax deductions available to those who sustained disaster-related property loss. Jackson & Jackson offers comprehensive services from the preparation of the casualty proof of loss to preparation of IRS Form 4864 for commercial clients.
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