Hurricane Ian Can you still deduct losses in 2023 for work not done in 2022 (did that).. Thank you

[Deb Kelly]

I asked this question before but may have missed the reply.  Thank you.  Deb Kelly

[Critter-3]

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https://www.irs.gov/taxtopics/tc515#:~:text=Casualty%20losses%20are%20deductible%20in,through%20a%20....

When to Deduct

Casualty losses are deductible in the year you sustain the loss, which is generally in the year the casualty occurred. You have not sustained a loss if you have a reasonable prospect of recovery through a claim for reimbursement. If you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to treat the casualty loss as having occurred in the year immediately preceding the tax year in which you sustained the disaster loss, and you can deduct the loss on your return or amended return for that preceding tax year. See Revenue Procedure 2016-53PDF for guidance on the time and manner of making and revoking an election under Code Section 165(i). Review Disaster Assistance and Emergency Relief for Individuals and Businesses for information regarding timeframes and additional information to your specific qualifying event.

[Opus 17 · Accepted solution]

If the loss occurred in 2022, you deduct the loss in 2022, only.

However, figuring the amount of a casualty loss can be tricky, and if you plan to make repairs in 2023, then you may want to include that in your calculation of your loss, or you may need to amend your 2022 tax return later.

Very briefly, the amount of your loss is the decrease in property value caused by the casualty.  This may require an appraisal.  You can use the cost of repairs as a fair estimate of the loss if the repair only restores the property to its previous condition.  For example, if a tree makes a hole in your 20 year old roof, and you get a whole new roof instead of just repairing the hole, the new roof is not a fair estimate of the amount of the loss.

You must also reduce your loss by any insurance coverage you have.

Example: Your home is damaged in the hurricane, and you get three repair estimates to restore the property to as-was condition that average $30,000.  For various reasons, your insurance will only cover $10,000.   Your deductible casualty loss is $20,000, and you report that loss on your 2022 tax return (because that is when the loss occurred), even if you have not yet made repairs.  If you end up spending $40,000 for repairs because you remodel and upgrade your kitchen rather than rebuilding it as-was, your loss is still $20,000 ($30,000 allowable minus your insurance coverage).  If the insurance changes their mind and reimburses you another $5,000 in 2023, then you either amend your 2022 tax return to reduce the loss to $15,000 or you report the $5,000 as taxable income for 2023 under the rules for "taxable recoveries."