Taxpayer has loss from water damage in 2024 due to a leak in a neighbor's condo, in California. Tens of thousands of dollars in damages after insurance. This is not related to any declared disaster by the President or Governor.
1. TurboTax tells me that this is not deductible for Federal but IS deductible for California state taxes. The Franchise Tax Board's website seems to suggest that California follows the Federal practice of looking to declared disasters: https://www.ftb.ca.gov/file/business/deductions/disaster-loss.html Is there a distinction in California taxes between a "disaster" loss and a run-of-the-mill "casualty" loss?
2. If it is indeed deducible in California, does that mean that there will be a difference in cost basis (with basis reduced for the casualty deduction for California taxes, but not for Federal taxes)?
3. Taxpayer plans to sell this condo in 2025. Is there ever a good strategic reason NOT to declare the casualty loss (maybe to preserve the basis to reduce capital gains taxes in 2025, or some other reason)?
