All too often we hear about damage caused by floods, fires, and other natural disasters. Just in case this ever happens to you we’d like to remind you that keeping records will help ease your way in getting tax deductions or insurance reimbursements.
You can deduct nonbusiness property losses caused by casualty within limits. But you won’t get the deduction you’re entitled to unless you can prove not only that you suffered a loss, but also the amount of the loss. Equally important is to make sure you know what records will satisfy your insurance company.
For starters you should put together an inventory of your property. You might do this by making a detailed listing, taking photographs or making a video recording. Whichever method you choose, be sure to keep a duplicate record in a separate location. A description of the property is key information. It’s also necessary to maintain proper records of your cost or other tax basis.
Also, be sure to document the state of your property after the disaster. Remember that there are several relief provisions for disasters in federally designated disaster areas. In particular, you are allowed to take a casualty loss on an amended return for the prior year, and favorable rules apply to insurance proceeds if your home or contents are destroyed which make it easier to defer or avoid gain.
Please don’t hesitate to call if we can help you further.