Our HOA created a special assessment to cover damage due to hurricane Ian to common areas not reimbursed by insurance. We are in a Federally declared disaster area. Can I deduct it as a casualty loss?

Normally an assessment is not deductible for a family home.  It would be added to the cost basis to reduce the taxable amount when the home was sold.

 

A casualty loss deduction is only allowed for losses from property owned by the taxpayer. If the common elements are not owned by individual, but rather by the homeowner’s association, town or community an individual would not be entitled to a casualty loss deduction. An individual's assessment for the replacement of a capital item, whether or not the item was damaged by a casualty, is a contribution to the capital of the association, town or community, and is not currently deductible by the individual.

 

However, if the individual members of the association own the common elements as tenants in common, the individual members may be entitled to casualty loss deductions in proportion to each member’s interest in the damaged common elements.

 

See Q5 FAQs for Disaster Victims

 

In TurboTax, jump to the entry area for casualty loss:

1. Open your return.
2. Search for "casualty loss" and then
3. click the "Jump to" link in the search results.
4. On the Casualties and Thefts (or Stolen or Damaged Items) screen, select Yes.
5. Answer the interview questions describing your event.
6. When you complete the event and reach the Property Summary screen, you can enter any additional property losses by selecting the Add a property button

Topic No. 515 Casualty, Disaster, and Theft Losses