As always - the answer is "maybe".
If your allowable loss exceeds the amount reimbursed by your insurance company, you may be eligible for a deduction. The rules are complicated and are handled differently for investment, business and personal property. In addition, there is basis and other restrictions to consider.
If you incurred a loss, it's incredibly important that you contact your tax advisor immediately.
Normally, your excess loss is deductible in year the casualty occurred. However, since any deductible loss from the fires is in an area officially designated by the President as eligible for federal disaster assistance, you can choose to deduct that loss on your return for the year immediately preceding the loss year. In other words, you may treat the loss as having occurred in either the current year (2007) or the previous year (2006), whichever provides the best tax results for you.
For the full details, check out IRS Tax Topic 515, Casualty, Disaster, and Theft Losses (Including Flood Losses), or IRS Publication 547, Casualties, Disasters and Thefts . Publication 584, Casualty, Disaster, and Theft Loss Workbook, can be used to help you catalog your property which is also very handy.
Our hearts go out to every person who suffered a loss.
I hope this information helps in some small way,
Nancy Moeller, CPA, REALTOR®
Nancy@TheOCExperts.com
Direct: (714) 276-7006
http://activerain.com/action/blogs_admin/www.TheOCExperts.com
Serving Orange County Real Estate, Anaheim Hills Based
Those fires were simply amazing with the destructive power that they had and the number of home that were destroyed. In my mind I compare the damage as being similiar to a hurricane's destructive powers.
Sean Allen
So you are a CPA and a Realtor. That's a plus for many of your clients. Here in Florida, as I suppose it is in all states, Realtor may not give tax advice.
Thanks for coomenting on my post: Mortgage Fraud #3: The Phantom Buyer
Just wanted to add a little:
The FTB announced that taxpayers impacted by the wildfires in any of the federally declared disaster areas will be given special tax relief... the counties of Santa Barbara, Ventura, Los Angeles, San Bernardino, Orange, Riverside, and San Diego are all now considered a federal disaster area.
California will match the postponement periods declared by the IRS, giving affected taxpayers an automatic postponement through January 31, 2008. This includes the estimated tax payment for the fourth quarter, normally due on January 15.
Also, taxpayers can claim a disaster loss in the tax year the disaster occurred (on the 2007 tax return that taxpayers will file next spring) or in the year before the disaster occurred (by amending the 2006 tax return filed earlier this year). The advantage of claiming a disaster loss in the prior year is that FTB can quickly issue a refund.
I hope this information can help those who are affected.