With homeowners still assessing the damage to their homes, tax consultants say it’s important to keep track of the costs of repair, especially in cases where homeowners are laying out money that’s not covered by insurance.
Tax experts say those losses could be counted as a loss under federal tax rules, and could be used as a tax deduction in their 2012 federal tax filing. CBS’ Marketwatch estimates the losses from Sandy total $20 billion, of which just $10 billion would be covered by insurance.
Here’s how it works, according to the Marketwatch piece.
For example: Take a single taxpayer with an adjusted gross income of $65,000 whose home was worth $170,000 before the storm. If the value of the home and land decreases to $100,000 as a result of damage caused by the storm but the insurance company pays $50,000, that homeowner has a loss of $20,000. Add to that $600 for furniture ruined during the storm. After subtracting the $100-per-incident exclusion, and 10% of the taxpayer’s income, the tax-deductible amount comes out to $14,000.