Be aware that claiming a disaster loss can be very complicated. First of all, if you have insurance, you must make a claim, even if you don’t want to. If you don’t make an insurance claim, the limit of your tax deductible loss is your insurance deductible or what you would have paid out of pocket if you had made a claim.
Second, the amount of your loss Is the loss in value to your property, which is not necessarily the amount it costs to restore your property. The IRS says that you can use the repair cost as a fair estimate of the loss of value if the repair restores the property to its pre-disaster condition. Let’s consider two examples. In one case, a storm damages your roof, and you do a complete replacement. The roof was 30 years old, so the restored roof is brand new and is worth much more than a 30 year old roof. In that case, The cost of replacing the roof is not a fair estimate in the loss of value caused by partial damage to a 30 year old roof.
In another example, a storm blows down several mature trees on your large wooded property. The cost of cleanup and removing the downed trees may be much less than the actual lost value due to the damage of old mature trees. In that case, you would need a real estate appraisal to document the before and after value of the property.
Finally, the only amount of the loss that is actually tax deductible is the amount that is more than 10% of your income. Enter the total amount of your loss in TurboTax will do the calculation, but this means that you may see very little tax benefit unless your loss is very large compared to your income.
