Disaster Losses On Your Taxes – More On How It Works

Did another disaster loss claim on a 2016 tax return yesterday - disaster losses on your taxes work differently in different situations. Here’s more on how it works when you have personal (not business) losses, and you aren’t itemizing your deductions.

Yesterday’s client was a renter, her apartment was on the ground floor and in the watershed for the San Jacinto river, so she had water nearly four feet high in her apartment. She lost EVERYTHING. I mean that literally, everything that she had other than what she had with her was submerged in water for at least two days. Her car was insured and they covered her on that, but nothing else had rising water/flood insurance coverage.

Since she was a renter, she didn’t have mortgage interest or property taxes to deduct, and the standard deduction of $6,300 was what she used.

Different from business disaster losses, personal disaster losses have to go on your Schedule A Itemized deductions. This means that you have to have MORE than $6,300 in deductions to benefit from the disaster losses.

How do you get there?

  • Medical expenses normally won’t help - you have to have a LOT of medical expense before any of it is deductible. See my explanation about that here.

  • Sales taxes in Texas ARE deductible so that will get you between approximately 10% to 20% of the way to the $6,300 hurdle. I will help you calculate that.

  • The part of your car registration that is tax is also deductible. We can look that up.

  • Charitable deductions - right now, you need every dollar you put into the Salvation Army’s Christmas bell ringer pot, every dime you put into the collection plate, every contribution you rounded up on your sale at the pet store or grocery store and all payroll deductions for charity. Get ALL of that together - it’s more than you think it is.

Now, let’s gather up your disaster losses. We will interview you to go through what you had, when you bought it, about what you paid for it and we will help you calculate thrift shop values for the current value at the time of loss.

Once we get to the $6,300 hurdle, we start to benefit you financially. When, like yesterday’s client, you’ve literally lost everything, it shouldn’t be too hard to get you to a refund that you’ll get sometime around Halloween if you start now.

If you haven’t yet filed your 2016 taxes and you have personal disaster losses, give us a call at 713-893-7348 and we’ll help you get everything wrapped up and filed.

Greg Melon