This section discusses the special rules that apply to federally declared disaster area losses. It contains information on when you can deduct your loss, how to claim your loss, how to treat your home in a disaster area, and what tax deadlines may be postponed. It also lists Federal Emergency Management Agency (FEMA) phone numbers. (See Contacting the Federal Emergency Management Agency (FEMA),
A federally declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. It includes a major disaster or emergency declaration under the Act.
A list of the areas warranting public or individual assistance (or both) under the Act for 2009 is available at the Federal Emergency Management Agency (FEMA) web site at www.fema.gov.
You enter disaster losses of personal use property on Form 4684, line 17. The net disaster loss (the excess of line 17 over line 14 of Form 4684) is not subject to the 10%-of-adjusted-gross-income limit. The net disaster loss is deductible as an itemized deduction on Schedule A, or as part of the standard deduction on Schedule L (Form 1040A or 1040).taxmap/pubs/p547-008.htm#en_us_publink1000225410
You generally must deduct a casualty loss in the year it occurred. However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct that loss on your return or amended return for the tax year immediately preceding the tax year in which the disaster happened. If you make this choice, the loss is treated as having occurred in the preceding year.
Claiming a qualifying disaster loss on the previous year's return may result in a lower tax for that year, often producing or increasing a cash refund.
If you do not choose to deduct your loss on your return for the earlier year, deduct it on your return for the year in which the disaster occurred. taxmap/pubs/p547-008.htm#en_us_publink1000225412
You are a calendar year taxpayer. A flood damaged your home this June. The flood damaged or destroyed a considerable amount of property in your town. Your town is located in an area designated by FEMA for public or individual assistance (or both). You can choose to deduct the flood loss on your home on last year's tax return. (See How to deduct your loss in the preceding year
If your inventory loss is from a disaster in an area designated by FEMA for public or individual assistance (or both), you may choose to deduct the loss on your return or amended return for the immediately preceding year. However, decrease your opening inventory for the year of the loss so that the loss will not be reported again in inventories. taxmap/pubs/p547-008.htm#en_us_publink1000225415
If your home is located in a federally declared disaster area, you can postpone reporting the gain if you spend the reimbursement to repair or replace your home. Special rules apply to replacement property related to the damage or destruction of your main home (or its contents) if located in these areas. For more information, see Gains Realized on Homes in Disaster Areas in the Instructions for Form 4684. taxmap/pubs/p547-008.htm#en_us_publink1000225416
If your home is located in a federally declared disaster area, your state or local government may order you to tear it down or move it because it is no longer safe to live in because of the disaster. If this happens, treat the loss in value as a casualty loss from a disaster. Your state or local government must issue the order for you to tear down or move the home within 120 days after the area is declared a disaster area.
Figure your loss in the same way as for casualty losses of personal-use property. (See Figuring a Loss,
earlier.) In determining the decrease in FMV, use the value of your home before you move it or tear it down as its FMV after the casualty.
Your home will be considered unsafe only if both of the following apply.
- Your home is substantially more dangerous after the disaster than it was before the disaster.
- The danger is from a substantially increased risk of future destruction from the disaster.
You do not have a casualty loss if your home is unsafe due to dangerous conditions existing before the disaster. (For example, your house is located in an area known for severe storms.) This is true even if your home is condemned. taxmap/pubs/p547-008.htm#en_us_publink1000225419
Due to a severe storm, the President declared the county you live in a federal disaster area. Although your home has only minor damage from the storm, a month later the county issues a demolition order. This order is based on a finding that your home is unsafe due to nearby mud slides caused by the storm. The loss in your home's value because the mud slides made it unsafe is treated as a casualty loss from a disaster. The loss in value is the difference between your home's FMV immediately before the disaster and immediately after the disaster. taxmap/pubs/p547-008.htm#en_us_publink1000225420
If you choose to deduct your loss on your return or amended return for the tax year immediately preceding the tax year in which the disaster happened, include a statement saying that you are making that choice. The statement can be made on the return or can be filed with the return. The statement should specify the date or dates of the disaster and the city, town, county, and state where the damaged or destroyed property was located at the time of the disaster. taxmap/pubs/p547-008.htm#en_us_publink1000225421
You must make this choice to take your casualty loss for the disaster in the preceding year by the later of the following dates.
- The due date (without extensions) for filing your income tax return for the tax year in which the disaster actually occurred.
- The due date (with extensions) for filing the return for the preceding tax year.
If you are a calendar year taxpayer, you ordinarily have until April 15, 2010, to amend your 2008 tax return to claim a casualty loss that occurred during 2009.taxmap/pubs/p547-008.htm#en_us_publink1000225423
You can revoke your choice within 90 days after making it by returning to the Internal Revenue Service any refund or credit you received from making the choice. However, if you revoke your choice before receiving a refund, you must return the refund within 30 days after receiving it for the revocation to be effective. taxmap/pubs/p547-008.htm#en_us_publink1000225424
You must figure the loss under the usual rules for casualty losses, as if it occurred in the year preceding the disaster. taxmap/pubs/p547-008.htm#en_us_publink1000225425
A disaster damaged your main home and destroyed your furniture in 2009. This was your only casualty loss for the year. Your home is located in a federally declared disaster area designated by FEMA for public or individual assistance (or both). The cost of your home and land was $134,000. The FMV immediately before the disaster was $147,500 and the FMV immediately afterward was $100,000. You separately figured the loss on each item of furniture (see Figuring the Deduction,
earlier) and arrived at a total loss for furniture of $3,000. Your insurance did not cover this type of casualty loss, and you expect no reimbursement for either your home or your furniture.
You choose to amend your 2008 return to claim your casualty loss for the disaster. You figure your deductible net disaster loss as follows:
| || || || || Furnish- |
| || || House || || ings |
| 1.||Cost|| $134,000 || || $10,000 |
| 2.||FMV before disaster||$147,500|| ||$8,000|
| 3.||FMV after disaster|| 100,000 || || 5,000 |
| 4.||Decrease in FMV (line 2 − line 3)|| $47,500 || || $3,000 |
| 5.||Smaller of line 1 or line 4||$47,500|| ||$3,000|
| 6.||Subtract estimated|
| -0- || || -0- |
| 7.||Loss after reimbursement|| $ 47,500 || || $3,000 |
| 8.||Total loss||$50,500|
| 9.||Subtract $100|| 100 |
|10.||Loss after $100 rule||$50,400|
|11.||Subtract personal |
| 0 |
|12.|| Amount of deductible net disaster loss || $50,400 |
You can deduct the net disaster loss as an itemized deduction or as part of your standard deduction for 2008.taxmap/pubs/p547-008.htm#en_us_publink1000225428
If you have already filed your return for the preceding year, you can claim a disaster loss against that year's income by filing an amended return. Individuals file an amended return on Form 1040X. taxmap/pubs/p547-008.htm#en_us_publink1000225429
You should adjust your deductions on Form 1040X. The instructions for Form 1040X show how to do this. Explain the reasons for your adjustment and attach Form 4684 to show how you figured your loss. See Figuring a Loss,
If the damaged or destroyed property was personal use property, you can deduct the net disaster loss as an itemized deduction on Schedule A (Form 1040) or Form 1040NR, Schedule A, or as part of your standard deduction on Schedule L (Form 1040A or 1040). However, if the property was income-producing property or employee property, you must itemize your deductions to deduct the loss.
If you must itemize your deductions to deduct the loss or you want to deduct the net disaster loss as an itemized deduction and you did not itemize your deductions on your original return, you must first determine whether the casualty loss deduction now makes it advantageous for you to itemize. It is advantageous to itemize if the total of the casualty loss deduction and any other itemized deductions is more than your standard deduction. If you itemize, attach Schedule A (Form 1040) or Form 1040NR, Schedule A and Form 4684 to your amended return. Fill out Form 1040X to refigure your tax on the rest of the form to find your refund. taxmap/pubs/p547-008.htm#en_us_publink1000225431
You should keep the records that support your loss deduction. You do not have to attach them to the amended return.
If your records were destroyed or lost, you may have to reconstruct them. Information about reconstructing records is available at www.irs.gov/newsroom/
. Type "reconstructing your records" in the search box.
It will be easier to prepare Form 1040X if you have a copy of your tax return for the preceding year. If you had your tax return completed by a tax preparer, he or she should be able to provide you with a copy of your return. If not, you can get a copy by filing Form 4506 with the IRS. There is a $57 fee (subject to change) for each return requested. However, if your main home, principal place of business, or tax records are located in a federally declared disaster area, this fee will be waived. Write the name of the disaster in the top margin of Form 4506 (for example, "Hurricane Katrina").taxmap/pubs/p547-008.htm#en_us_publink1000225433
If part of your federal disaster loan was canceled under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, it is considered to be reimbursement for the loss. The cancellation reduces your casualty loss deduction. taxmap/pubs/p547-008.htm#en_us_publink1000225434
Do not include post-disaster relief grants received under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, or funeral expenses. Do not deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. If the casualty loss was specifically reimbursed by the grant and you received the grant after the year in which you deducted the casualty loss, see Reimbursement Received After Deducting Loss
earlier. Unemployment assistance payments under the Act in excess of $2,400 per recipient are taxable unemployment compensation.
A grant that a business receives under a state program to reimburse businesses for losses incurred for damage or destruction of property because of a disaster is not excludable from income under the general welfare exclusion, as a gift, as a qualified disaster relief payment (explained next), or as a contribution to capital. However, the business can choose to postpone reporting gain realized from the grant if it buys qualifying replacement property within a certain period of time. See Postponement of Gain
earlier for the rules that apply.
Qualified disaster relief payments are not included in the income of individuals to the extent any expenses compensated by these payments are not otherwise compensated for by insurance or other reimbursement. These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). No withholding applies to these payments.
Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses.
- Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster.
- Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. (A personal residence can be a rented residence or one you own.)
- Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster.
Qualified disaster relief payments also include amounts paid to individuals affected by the disaster by a federal, state, or local government in connection with a federally declared disaster.
Qualified disaster relief payments do not include:
- Payments for expenses otherwise paid for by insurance or other reimbursements, or
- Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation.
Qualified disaster mitigation payments made under the Robert T. Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not included in income. These are payments you, as a property owner, receive to reduce the risk of future damage to your property. You cannot increase your basis in the property, or take a deduction or credit, for expenditures made with respect to those payments. taxmap/pubs/p547-008.htm#en_us_publink1000225441
Generally, if you sell or otherwise transfer property, you must recognize any gain or loss for tax purposes unless the property is your main home. You report the gain or deduct the loss on your tax return for the year you realize it. (You cannot deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier.) However, if you sell or otherwise transfer property to the Federal Government, a state or local government, or an Indian tribal government under a hazard mitigation program, you can choose to postpone reporting the gain if you buy qualifying replacement property within a certain period of time. See Postponement of Gain
earlier for the rules that apply.
Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. For these special rules, see the following discussions.
- Main home in disaster area earlier under Replacement Property.
- Business or income-producing property located in a federally declared disaster area earlier under Replacement Property.
- Main home in disaster area earlier under Replacement Period.
- Property in a Midwestern disaster area earlier under Replacement Period.
- Property in the Kansas disaster area earlier under Replacement Period.
- Property in the Hurricane Katrina disaster area earlier under Replacement Period.
The IRS may postpone for up to one year certain tax deadlines of taxpayers who are affected by a federally declared disaster. The tax deadlines the IRS may postpone include those for filing income, excise, and employment tax returns, paying income, excise, and employment taxes, and making contributions to a traditional IRA or Roth IRA.
If any tax deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). taxmap/pubs/p547-008.htm#en_us_publink1000225445
If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement.
- Any individual whose main home is located in a covered disaster area (defined later).
- Any business entity or sole proprietor whose principal place of business is located in a covered disaster area.
- Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area.
- Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. The main home or principal place of business does not have to be located in the covered disaster area.
- Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area.
- The spouse on a joint return with a taxpayer who is eligible for postponements.
- Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area.
- Any individual visiting the covered disaster area who was killed or injured as a result of the disaster.
- Any other person determined by the IRS to be affected by a federally declared disaster.
This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. taxmap/pubs/p547-008.htm#en_us_publink1000225447
The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. taxmap/pubs/p547-008.htm#en_us_publink1000225448
If you live in an area that was declared a disaster area by the President, you can get information from FEMA by visiting its website at www.fema.gov
calling the following phone numbers. These numbers are only activated after a federally declared disaster.
- 1-800-462-7585, if you are a TTY/TDD user.