storm damage deductions
have client on the jersey shore who has to put out a lot of money to fix the storm damage to his house. Insurance only covered a part of the damage.
He asked is he can take this as a deduction on his income tax.
Question:
Can he take the money he put out for the damages on his house off his taxes as a deduction?
or
does the money add to his cost basis of the house if he ever sells the home to minimize any gains?
Thank you,
Douglas
Permalink Submitted by Alan Spross on Thu, 2012-11-08 03:46
He may be able to deduct casualty losses to the extent they exceed insurance reimbursements. There is a 10% deductible, and there are special rules for a federal disaster area with respect to which year the loss can be deducted. There are also basis adjustments, some increases and some decreases, with the casualty deduction a decrease to basis.
All the factors make this subject too complex for a detailed response here. IRS Pub 547 covers casualty losses in detail.