It’s been a busy year for natural disasters and a catastrophic one for residents who have racked up losses. Be aware that writing off those damages on your tax return may be difficult. Here’s why.
Bracing your finances for a natural disaster? Don’t bet on collecting a tax break from any property damage. That’s because taxpayers can only claim the deduction if the damage stems from a federally declared disaster. It wasn’t always this way: The Tax Cuts and Jobs Act, which took effect in 2018, set a higher bar for individuals who claim losses from property damage on their federal tax returns. This particular provision is in place until 2025. „Not all disasters necessarily get a federal disaster declaration,“ said Neal Stern, CPA and member of the American Institute of CPAs‘ national CPA financial literacy commission. „That matters now.“ It’s a key distinction: In a major hurricane, some areas may be deemed federally declared disasters, while others that are still subject to flooding and torrential rains aren’t. In recent days, there were emergency declarations issued for parts of Texas, Mississippi and Louisiana due to two named storms: Laura and Marco, according to the Federal Emergency Management Agency. The National Oceanic and Atmospheric Administration upgraded Laura to a hurricane on Tuesday morning. Parts of California were also declared a „major disaster“ due to ongoing wildfires, according to FEMA. This year, as of July 8, there have been 10 weather or climate disaster events with losses exceeding $1 billion each, according to NOAA.
