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If this Spring’s violent weather has caused damage to your property, you may be able deduct a part of the cost of the damage from your taxes.
You are generally eligible to deduct losses that result from disasters such as tornadoes, floods, blizzards, hurricanes, and other natural disasters. Remember that the deduction amount is limited (in part) by any amount that you recover by way of insurance – even if you don’t file a claim.
If you’re in a presidentially-declared disaster area, such as in Alabama and Georgia impacted by the recent tornado spree, there are special rules that apply to you. You are eligible to deduct those losses that occurred in the specific event in 2011 on either your 2010 or 2011 tax return, whichever is more beneficial to you. If you’ve already filed the return for 2010 you can amend it with the casualty loss information in order to get a refund. For more information, go to www.fema.gov/disasters.fema.
If you have otherwise experienced a loss due to damage from one of these natural disasters, this is classified by the IRS as a casualty loss. Casualty losses are deducted using IRS Form 4684. Deductible losses are limited in two ways for individuals: the first $100 is not deductible; above that amount, your deductible loss is limited to the amount that is greater than 10% of your Adjusted Gross Income (AGI). You must itemize deductions in order to deduct a casualty loss as an individual.
For a business, the limits mentioned above are not in affect, and they do not need to be claimed as itemized deductions.An IRA Owner's Manual or if you'd prefer the Kindle version (and let's face it, ALL the cool kids do!), you can find that at this Kindle version link.