Income Tax Deductions For Property loss

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  1. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    EM 8870-E • August 2004
    Adapted for use in Oregon from The Disaster
    Handbook, 1998 National Edition, Institute of Food
    and Agricultural Sciences, University of Florida,
    Cooperative Extension Service.
    Property losses from natural disasters can
    be tax deductible. Such deductions,
    which are allowed for partial or total loss
    of personal or business property, could greatly
    reduce the amount of federal income tax owed
    for the year the disaster occurred.
    A variety of records are required when
    claiming a theft or casualty loss resulting from
    a disaster:
    • Documentation of the kind of disaster and
    when it occurred.
    • Documentation of the damage that was a
    direct result of the disaster.
    • Ownership of the property.
    • Income tax basis in the property (usually
    the original cost of the property plus the
    cost of any improvements before the loss,
    minus depreciation claimed for income
    tax purposes).
    • Fair market value before and after the disaster.
    • Any insurance benefits or other compensation
    received including free repairs, restoration,
    and cleanup from any disaster relief agencies.
    “Before” and “after” photographs, receipts,
    cancelled checks, deeds, purchasing contracts,
    and professional appraisals are good supporting
    evidence for casualty losses.
    Obtain a professional estimate of value on
    badly damaged business or personal property as
    soon as possible. This estimate will serve as
    evidence for casualty loss claims. Appraisal fees
    are tax deductible.
    Income Tax Deductions
    for Property Loss
    Itemizing tax deductions
    Casualty losses are deductible when deductions
    are itemized. Losses from fire, storm, theft,
    or property destroyed by a sudden external force
    can be claimed as casualty losses. The deduction
    must be reduced by any reimbursements or
    payments to rebuild or restore property.
    Homeowners can claim a casualty loss
    deduction for the difference between the fair
    market value of the property before and after
    the disaster, subtracting insurance proceeds or
    other reimbursements received to rebuild or
    restore a home, 10% of adjusted gross income,
    and $100 per disaster event.
    To document the “before” and “after” value of
    a home, use the most recent assessed value from
    property taxes for the “before” disaster market
    value and a current appraisal for the “after”
    disaster market value.
    Grants, gifts specifically designed to repair or
    replace property, must be deducted. Homeowners
    who have not received reimbursement at
    the time of tax filing must estimate the amount of
    their expected reimbursement.
    Consult a local tax advisor and refer to current
    Internal Revenue Service (IRS) instructions for
    figuring tax loss deductions. Use IRS Tax Form
    4684 and information sheet to file a casualty loss
    deduction as part of your tax return.
    Internal Revenue Service
    For specific questions, the IRS has a toll-free
    telephone number (1-800-829-3676) and a
    website (
    Income Tax Deductions for Property Loss
    EM 8870-E • August 2004 • Page 2
    © 2004 Oregon State University. This publication may be photocopied or reprinted in its entirety for noncommercial purposes.
    This publication was produced and distributed in furtherance of the Acts of Congress of May 8 and June 30, 1914. Extension work is a
    cooperative program of Oregon State University, the U.S. Department of Agriculture, and Oregon counties. Oregon State University Extension
    Service offers educational programs, activities, and materials without discrimination based on race, color, religion, sex, sexual orientation,
    national origin, age, marital status, disability, or disabled veteran or Vietnam-era veteran status. Oregon State University Extension Service
    is an Equal Opportunity Employer. Published August 2004.
    OSU Extension Service. The Extension Service
    has materials on related topics. To locate the local
    office of the OSU Extension Service, go to
    “County Government” in your telephone book.
    Publications and videos are available for
    viewing on the OSU Extension website
    (, then “Publications”).
    You may order copies by fax (541-737-0817),
    e-mail (, or phone
    American Red Cross. The alphabetical listing
    in local phone books will point you to a local
    chapter of the American Red Cross. The agency’s
    website includes information and materials in
    English and Spanish (
    Emergency Management. The “County
    Government” section in local phone books lists
    each county’s emergency management unit.
    Listings vary by county (look under Sheriff or
    Health departments, Emergency Management
    services, Civil Defense, Public Works, or related
    Extension Disaster Education Network
    (EDEN). This website provides a list of resources
    developed in other states about floods; drought;
    snow, ice, and wind damage; animal emergencies;
    and general disaster (,
    then “Extension websites” and “Other on-line
    Emergency Animal Rescue Service (EARS).
    This site provides tips for animal owners and
    links to emergency shopping lists for owners of
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    Federal Emergency Management Agency
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    materials specifically developed for children
    Oregon Emergency Management (OEM).
    Affiliated with the Oregon State Police, the OEM
    website offers emergency-related information on
    earthquakes and tsunamis, and provides disaster
    recovery resources (
    Social Security Online. The official site of the
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