My house was damaged by a glacial flood this past summer. It was a federally declared disaster and I have the FEMA number already entered. I am desperately trying to figure out what the "cost basis" means for my casualty deduction. I had some damage to my home for which I was partially reimbursed by a state assistance program. The IRS form (547) referenced in TurboTax is absolutely no help whatsoever. Is my cost basis just what I paid for my house originally? And then subtracting out the state assistance payment?
That doesn't make much sense honestly because it results in kind of a ridiculously large tax refund. Admittedly, the FMV of my house is down by about $50K, but I am not at all sure that accounts for the change.
