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Did You Have Substantial Property Damage in 2006?
You May Be Able to Deduct a Portion of Uninsured Losses from Your Taxes; Document Unreimbursed Losses, Including Deductibles, Recommends the I.I.I.
NEW YORK, March 26, 2007 — With less than a month until tax day, taxpayers are sifting through their files to assess last year's gains and losses. If you suffered a loss of personal property not entirely covered by insurance, a portion of the unreimbursed loss may be an allowable deduction on your federal income tax return, according to the Insurance Information Institute (I.I.I.).
“If your home, car or boat was damaged or destroyed by a windstorm, fire, flood, vandalism or other sudden and unexpected disaster, you may be able to deduct a portion of the loss from your taxes,” said Jeanne M. Salvatore, I.I.I.'s senior vice president, public affairs.
To qualify for the deduction, these losses usually need to be substantial, said the I.I.I. If you were significantly underinsured or had a large catastrophe deductible, you may have a sizable unreimbursed casualty loss.
“Generally, you can deduct the loss to the extent it exceeds 10 percent of your adjusted gross income, less one hundred dollars," said Anthony Orlando, of the New York based accounting firm Feuer and Orlando LLP. “A special provision, however, was recently enacted for the victims of Hurricanes Katrina, Wilma and Rita. Losses incurred during those storms do not have to exceed 10 percent of adjusted gross income to be deductible. You would have to file amended tax returns for those years in order to take advantage of this.”
"If the property is used in a trade or business, slightly different rules apply, so it is important to ask your tax preparer for assistance,” Orlando noted.
“Be sure to collect all receipts, insurance statements, police reports (if appropriate) and other documentation and present it to your tax preparer to see if you qualify,” said Salvatore.
And, according to Orlando, medical expenses exceeding 7.5 percent of your adjusted gross income may also qualify for a deduction.
If you prepare your own tax returns, be sure to review the "Nonbusiness Casualty and Theft Losses" and Publication 502 on Medical and Dental Expenses for 2004, available on the Internal Revenue Service Web site. You can also contact your state income tax bureau to learn more about both the federal and state guidelines for this deduction.
For more information about insurance, visit the I.I.I. Web site.
The I.I.I. is a nonprofit, communications organization supported by the insurance industry.