How to Itemize Casualties from a Flood for the IRS
The Internal Revenue Services allows a taxpayer to deduct casualty damages to his property. A casualty loss is defined as an unexpected or unusual incident. Flood damage meets this definition and is deductible. The deduction may only be applied to damages that exceed your private insurance coverage. You must use your insurance to pay for all covered damage. You may not skip filing an insurance claim to receive a higher tax deduction. The casualty deduction is itemized using Schedule A.
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Instructions
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Calculate the fair market loss of the flood damage to your home. This is the decrease in your home's value for sale as a result of the damage. You may need to hire an appraiser to justify this loss.
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Calculate the loss to your home as a percentage of its basis. The home's basis is its original purchase price plus the cost of any improvements. If 20 percent of your home was damaged by the flood, multiply the home's basis by 20 percent to calculate the basis loss.
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Use the lesser of the basis loss and the fair market value loss as your initial deductible loss.
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Subtract any insurance proceeds paid out to cover the loss from your deductible loss value.
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Subtract an additional $100 deductible from your deductible loss value.
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Subtract 10 percent of your annual adjusted gross income from your deductible loss value. The remainder is your deductible casualty loss from the flood. This calculation is completed on IRS Form 4684.
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Elect to itemize your deductions on your tax return and list the flood damage to reduce your taxes. Add up the value of your itemized deductions on IRS Schedule A. Enter the value of the casualty loss on line 20 of Schedule A.
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Tips & Warnings
Be sure to compare the value of your itemized deductions to the standard deduction. You may receive a higher tax deduction from the standard deduction.
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