White Hall Progress logo

Tax refunds for damages available


Arkansans who have suffered property damage due to severe weather events in the state may have the ability to get help through their federal tax returns by claiming casualty-loss tax deductions.

“Claiming a casualty loss on your federal income tax return may be a way to get some financial relief from the federal government for having experienced weather-related property damage,” says IRS spokesman David Stell.

Stell says when losses from severe weather events are involved, basically two different tax scenarios could apply. In the absence of something called a “federal disaster declaration,” severe weather victims can claim weather-related casualty losses when they file their tax returns for the year in which the losses occurred. “For instance,” Stell says, “losses that occur during 2012 can be claimed when victims file their 2012 federal income tax returns in 2013.”

However, when severe weather causes the eventual issuance of a federal disaster declaration, a provision of federal tax law then allows a victim in the disaster area to choose to claim related casualty losses on the tax return for the year in which the losses occurred, or on the tax return for the previous year. “This special law provision allows victims to potentially receive tax refunds from casualty loss claims much sooner than if they had to wait until the following year to file the claims,” says Stell. Even if the previous year’s tax return has already been filed, a federally-declared-disaster casualty loss can be claimed by changing the previous year’s tax return using IRS Form 1040X, Amended U.S. Individual Income Tax Return.

It’s important to note that casualty loss claim amounts must be reduced by any insurance reimbursements, by $100 per event, and by 10 percent of the filer’s adjusted gross income. Losses related to business or income-producing property may not be subject to the per-event and percentage of AGI limitations, but insurance reimbursements must be considered.

According to the Federal Emergency Management Agency’s list of 2012 Federal Disaster Declarations, there have been no federally-declared disasters in Arkansas thus far this year (http://go.usa.gov/ddf). However, the National Weather Service’s Storm Prediction Center Severe Weather Events Archive (http://go.usa.gov/ddm) indicates Arkansans in various parts of the state have experienced 23 severe-weather events already during 2012.

Stell says compiling good records of weather-related damage is essential to filing an accurate casualty-loss claim. Additionally, a recent IRS news release discusses records-related preparedness before disaster may strike (http://go.usa.gov/d6q). Finally, the IRS provides much information to help weather-related victims on the Disaster Assistance and Emergency Relief for Individuals and Businesses page (http://go.usa.gov/vJ4) of its Website, irs.gov.