We at B&J Bookkeeping are looking forward to bringing you real answers to real questions. Our Ask a Houston Bookkeeper series is intended for those who live in the Houston or surrounding areas but others are welcome to read. In the aftermath of one of the worst hurricanes in Houston’s history, we will answer the question: Can I write off Hurricane Harvey damage?
1. Do I Qualify for Write Offs?
If you itemize deductions in your tax return, you are “writing off” items. This is the only means in which to claim your flood, hurricane, etc. damage as a loss. Currently, there is no option on the short form, which may change in the future. Ultimately, you will file your damage as casualty loss and must itemize your deductions.
2. What is a Causality Loss?
The IRS defines a casualty loss as “damage, destruction, or loss of property.” This damage must be done by an event that is sudden or unusual. The area in Hurricane Harvey was officially designated a disaster area and qualifies. You may have to claim a certain amount before a casualty loss is eligible as a tax deduction.
3. What Does Qualify?
On the other hand, some losses may not be considered deductible. Damage that occurred during normal conditions is not deductible. For example, if your home experienced damage before the hurricane, certain items may not be deductible. This includes previously damaged appliances, vehicles, furniture, and anything else in this arena. These items are considered to be progressively deteriorated and have natural wear or tear. However, you may claim partial deductions for these items depending on their condition.
4. Is Writing Off Hurricane Harvey Damage Worth It?
To put it briefly: “it depends.” In order to qualify, you must have a certain amount of damage vs. a certain amount of income. The criteria is as follows:
- Calculate your total damage, including items that were partially damaged.
- Subtract $100 from this total.
- Tally 10% of your Adjusted Gross Income for the year. An estimate is okay.
- The total of your damages minus $100 must be more than 10% of your estimated adjusted gross income.
- If the number is less, you may not claim this deduction.
- If you do qualify, you must use Schedule A to fill out next years taxes.
- Be sure to fill out and attach Form 4684 – Casualties and Thefts.
5. Can I Write Off Hurricane Harvey Damage if My Insurance Reimbursed Me?
In short: no. If your insurance company has paid to replace all items damaged in the flood, you may not claim themas losses. The same goes with any damage to your house, vehicles, or property. However, if your insurance did not pay for all your damage – minus $100 – you may be eligible. If the dollar amount of unreimbursed damage is more than 10% of your adjusted gross income, you may be able to write it off.
More on Can I Write Off Hurricane Harvey Damage?
If you live in Houston and need bookkeeping services to help keep up with your books after Hurricane Harvey, feel free to contact us for to learn more on how we can help.