Damage from the Winter Storm? You May Qualify for a Casualty Loss Deduction

February’s winter storm wreaked havoc across Texas, with some reports estimating damages totaling as much as $200 billion.  Texans are left dealing with massive repair bills not covered by insurance. Those sustaining damages may be eligible for an income tax deduction which allows qualifying individuals to claim a loss on their 2020 or 2021 tax return.

How to Calculate the Deduction

Taxpayers who live within a federally declared disaster area caused by the winter storm may claim a deduction for property damaged by the storm. The loss is equal to the cost (or basis) of the property destroyed or the decrease in the property’s fair market value if not completely destroyed.  This amount must be reduced by any insurance proceeds received.  The deduction will equal the amount that exceeds $500.

Winter Storm

How to Claim the Deduction

Taxpayers may claim this deduction by completing Form 4684 and eligible to take the loss even if they do not itemize.   Additionally, taxpayers can elect to take this deduction in 2020 or 2021, whichever is most advantageous. Individuals who have already filed their 2020 returns may amend to take advantage of this deduction.  The extent that the loss exceeds taxable income may be carried forward as a net operating loss.

If the storm damaged your property and you have questions about taking advantage of this deduction, please reach out to your ATKG advisor for guidance.

Tom Landers is a Tax Professional with ATKG and a Certified Public Accountant. He graduated from Southern Methodist University with a bachelor’s in business administration. He was a recipient of the Hunt Leadership Scholarship – an award given annually to approximately twenty students from across the United States. Tom received his Master of Science in Accounting with a concentration in Tax. Prior to joining ATKG in 2020, he worked for a Big Four firm for nearly two years.

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