If you’ve been affected by the fires, or any disaster in a federally declared disaster area, payments you receive from the Red Cross churches or neighbors are excluded from gross income. This money received could be for personal expenses, family expenses, food, medical, housing and repairs to a personal residence not covered by insurance. What if you lost your tax return in the disaster? File Form 4506 to request a copy of your prior year’s tax return – writing ‘Houston Flood’ on the top waives the $50 fee. Filing and penalty relief is already applied to any taxpayer with an IRS address of record located in the disaster area.
Other key considerations:
- Deduct travel expenses if forced to temporarily move
- Casualty loss is the lesser of adjusted basis of property or the decrease in fair market value (reduced by insurance proceeds)
For more information on how to deduct the casualty loss contact us.