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Victims Of Hurricane Irene May Be Able To Write Off A Disaster Loss For Property Damage

The Internal Revenue Service (IRS) allows a tax deduction for casualty losses, including losses due to property damage or destruction. When it comes to a disaster, The IRS defines a casualty loss as the "damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual." That can include both natural and man-made disasters -- earthquakes, fires, floods, car accidents, and vandalism.

The deduction for property damage is based on the decline in the fair market value of property due to damage or destruction, but you can't deduct the full amount of the loss and must follow a detailed calculation involving your adjusted gross income and the major portion of the loss to determine the actual deduction.

Casualty loss is an itemized deduction included on Schedule A.  Schedule A deductions are subtracted from your adjusted gross income, which reduces your taxes by reducing the amount of your income that is actually taxed.  The deduction is only available to the extent that insurance or other forms of compensation don't cover the cost of damage or destruction.

State tax laws vary on casualty loss deduction and because the deduction can involve large amounts and complex calculations, you should seek the help of an enrolled agent, certified public accountant or other tax professional to help you complete you state and federal tax returns.

For more information go to "IRS Publication 547: Casualties, Disasters and Thefts,"

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