Safe Harbor Methods for Calculating Property Loss Tax Deductions
Recently, the IRS announced that it would be taking further steps to aid hurricane victims by providing safe harbors methods that taxpayers can use to calculate their hurricane-related casualty and theft losses. There are a variety of methods that can be used in making this determination, so if your home recently sustained damage in a hurricane, it is important to contact an experienced tax attorney who can help you calculate your losses and apply them to a tax deduction.
Types of Safe Harbor Methods
There are four safe harbor methods that the IRS has approved for use in calculating tax deductible hurricane-related losses. While the first method can be used for any qualifying casualty or theft loss, the other three are only applicable to losses that occurred as a result of a disaster declared by the federal government.
Qualifying Loss Methods
The methods outlined by the IRS can be used to calculate any damage sustained by residential property owners. For instance, taxpayers can use the Estimated Repair Cost Safe Harbor Method to determine the decrease in the value of their residential property. Under this method, an individual is permitted to use the less expensive of the two estimates, each of which is prepared by an independent contractor that has been licensed by the state. Generally, this method is available for losses of $20,000 or less. Alternatively, a person impacted by a recent hurricane could use the De Minimis Safe Harbor Method, which allows taxpayers to provide their own good faith estimate of the cost of repairs. However, taxpayers can only use this method if they maintain records detailing the methodology used to estimate the loss. This method is only available for losses of $5,000 or less. Homeowners also have the option of using the reports prepared by their homeowners’ or flood insurance companies.
Federally Declared Disaster Area Methods
Taxpayers who suffered losses due to a federally declared disaster must use different calculation methods, one of which is to use the repair costs contained in a signed contract prepared by a licensed contractor. The IRS also provides a cost index that helps determine the value of personal belongings that were damaged, stolen, or destroyed.
Ensuring that these calculations are done correctly is extremely important because taxpayers are permitted to deduct any losses sustained during the year as a result of fire, storm, or theft that were not compensated by their insurer.
Call Today to Learn More About Your Potential Tax Deductions
If you were affected by a hurricane last year, you may qualify for a safe harbor tax deduction. Unfortunately, the IRS only allows taxpayers to use specific methods when calculating their deductions, so if your property or personal belongings were damaged during a hurricane, please call 386-490-9949 to schedule a one-one-one meeting with experienced Florida tax attorney Ronald Cutler, P.A. We understand that our clients are busy and so make ourselves available on weekends, as well as weekdays. Please call or send us an online message today.