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If claiming a loss on your tax return, you must include the FEMA disaster declaration number on Form 4684, Casualties and Thefts, attached to the return. The number can be found on the IRS’s
disaster relief news releases. You have to be able to itemize your deductions in order to claim property or casualty losses. To itemize, you should have more than the standard deduction.
The standard deduction for married couples filing jointly for tax year 2022 is $25,900; for single taxpayers and married individuals filing separately, the standard deduction is $12,950.
For heads of households, the standard deduction is $19,400. You must subtract $100 from each casualty or theft event that occurred during the year after you’ve subtracted any salvage value
and any insurance or other reimbursement. Then add up all those amounts and subtract 10 percent of your adjusted gross income from that total to calculate your allowable casualty and theft
losses for the year. GET RELIEF FOR LOST RECORDS Calculating losses can seem impossible when records have been destroyed in a fire, flood or other disaster. “I have clients who have
literally lost everything. You see the before and after pictures, and the after picture looks like the moon. There’s nothing left,” says Pon. If documents were destroyed, there are ways to
reconstruct records, such as obtaining electronic copies of bank and credit card statements. The price you paid for your house is a public record. Most people remember which charities they
donated to and can call the nonprofits to request documentation, notes Pon. The IRS typically issues “safe harbor methods” for taxpayers to calculate losses after a disaster, according to
Kaminski. Methods can include estimated repair cost, a licensed contractor’s estimate of the cost to restore the property, or the value from an appraisal. “The IRS is sympathetic about
people losing all their records,” he says. You also can obtain a free replacement copy of lost or damaged tax returns; the IRS waives the fee it normally charges. But the bottom line is to
keep good records and maintain copies you can access electronically or off-site from your home in case your residence is damaged or destroyed. AMEND A RETURN TO CLAIM A LOSS IN THE PRIOR
YEAR Taxpayers who suffer uninsured or unreimbursed disaster-related losses can claim those losses on the tax return for the previous year, if they wish. “This gives disaster victims
additional flexibility,” says Smith, noting the loss may be more beneficial from a tax perspective in the previous year versus the current year. “Plus, if it’s helpful to you from, say, a
cash-flow perspective, you have the opportunity of perhaps getting a refund sooner, rather than waiting to get the benefit when you file next year.” Pon says it can be worth the time to
assess which is the better year to file. “You want to run the numbers to see which is going to give you the bigger refund,” he says. “It depends which tax bracket you’re in, your tax
situation. The same loss could have a different result in one year than the other.”