Disaster Losses On Tax Returns – How It Works
Just did my first post-Harvey disaster losses on a 2016 tax return. It wasn’t much of a loss; couple of desks, some lobby furniture, a couple of printers/copiers, a computer after a storefront was flooded with nearly three feet of water. Here is how it works:
The client reduced the tax liability by $2,000 in round numbers - that means that, after detailing what was lost, how it was lost, and what it was worth, the income write down was over $10,000 and the tax was reduced by the client’s tax rate.
After confirming with the client what was submerged in the toxic water that washed through her storefront, we inventoried what was there and what was lost. There was no flood insurance, so it was a total loss. Even good Hon office furniture isn’t desirable after being underwater for two days! For the most part, the purchase dates were listed as “Various”. I interviewed the client for the original purchase prices, and then checked out what the pre-submersion market value was for each.
The client was on an extension for 2016, so taking these disaster losses didn’t require an amendment. After checking everything for accuracy, the disaster losses reduced income taxes by right at two grand.
For someone who had uninsured disaster losses of $40,000, the potential tax refund could be between $9,000 and $14,000, depending on your tax rate. The significant thing about this is that the refund would be QUICK - five weeks or so from filing.
We are ready to help you pull the information together, even if you lost your tax documentation in the flooding. We will help you by making it as simple as is possible; we can even help by doing everything electronically. You can get started with a phone call at 713-893-7348, or by setting up your own client file at this link.