Form 4684 and Damaged house for hurricane Ian

[DoninGA]

@SilverknightFL 

IRS website for victims of Hurricane Ian in Florida - https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-hurricane-ian-in-florida

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either the year in which the event occurred, or the prior year. See Publication 547 for details.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684, Casualties and TheftsPDF and its instructions.PDF

Affected taxpayers claiming the disaster loss on their return should put the Disaster Designation, "FL Hurricane Ian" in bold letters at the top of the form. Be sure to include the FEMA disaster declaration number, DR-4673-FL, on any return. See Publication 547 for details.

[SilverknightFL]

To be clear, the loss is still deductible. Just not as deductible as it could have been.

It's the difference between Ian being a qualified federal disaster but not eligible for qualified disaster losses.

Form 4684

Section A Line 11: Enter $100 ($500 if qualified disaster loss rules apply; see instructions)

You will enter "$100.00" 

From Instructions: 

Line 11
If you sustained a qualified disaster loss, including those sustained in 2022 (this is what screws people up), add the amounts on line 4 of all Forms 4684. Compare the sum with the amount on line 10. If the amount on line 10 is larger, enter $500 on line 11 of the Form 4684 reporting the qualified disaster losses.
If the amount on line 10 is smaller, or if you are reporting a disaster loss, enter $100 and complete the remainder of the form without applying the special rules for qualified disaster losses.

When the instruction were printed, Ian (Sept 28, 2022) was not listed as a qualified disaster loss for the tax year, even though it had a FEMA disaster loss ID of DR-4673-FL. 

Two documents to look at, and why Ian wasn't (isn't) eligible for qualified disaster losses:

This describes the issue perfectly: https://donalds.house.gov/uploadedfiles/hurricane_ian_qualified_loss_dilemma_pdf.pdf

This is the legislation: "H.R.1331 - To treat Hurricane Ian as a qualified disaster for purposes of determining the tax treatment of certain disaster-related personal casualty losses."

Unfortunately for us, while the legislation was introduced by  Rep. Steube, W. Gregory [R-FL-17] on 03/01/2023 and referred to the House Ways and Means Committee, it was never taken up and died. I was hoping for this which is why I filed an extension to file my 2022 taxes.

It was very simple. Here's the summary: "This bill treats Hurricane Ian (occurring on and after September 22, 2022) as a qualified disaster area for purposes of the disaster-related personal casualty loss tax deduction."

Here's the link: https://www.congress.gov/bill/118th-congress/house-bill/1331?s=1&r=83

You can read the entire bill, see co-sponsors (No NY support, probably because Florida didn't support Super Storm Sandy emergency funds).

There was no will in Congress to force this bill forward. More importantly, no action by our Governor to shame Congress into moving it forward (a press conference with the Bill's sponsor, and maybe with all Florida Reps and Senators. NOTHING.

[DoninGA]

@SilverknightFL Just entered a casualty loss on Form 4684 using the Hurricane Ian code of DR-4673.  On Line 9 the casualty loss figure is $50,000.  On Line 10 the amount is from Line 9, amount $50,000.  On Line 11 the amount is $500.  On Line 12 the amount is $49,500.  On Lines 14 and 15 the amount is $49.500.

On Schedule A Line 16 the entry is for a NET QUALIFIED DISASTER LOSS of $49,500.

I must be totally misunderstanding your issue.  The disaster loss is being reported correctly based on the tax code for Casualty and Theft Losses.

[SilverknightFL]

I believe the difference is in the impact of AGI.

I can't really offer any more help. 

[SilverknightFL]

Line 11 should be $100.

[DoninGA]

@SilverknightFL 

The Casualty loss if from a Qualified Disaster Loss

As stated on Form 4684 Line 11 - Enter $100 ($500 if qualified disaster loss rules apply; see instructions)

[JHtaxpayer]

Like you, I extended in the hopes this would be resolved.  I am debating doing so again this year in which case I would amend 2022 and use the standard deduction to generate a larger NOL carryover.  Since IAN is NOT QUALIFIED, I had to itemize in 2022 to claim the loss (could not use the standard deduction).  Would like your opinion about my approach.  (Using fictitious but realistic round number to illustrate):

By itemizing:

2022 AGI  $40,000

2022 Itemized deductions (including casualty loss after $100 + 10% exclusion)   $50,000

2022 NOL Carryforward   $10,000

By amending 2022 (assuming it gets designated as qualified) and taking the standard deduction
2022 AGI  $40,000

2022 Standard deduction (MFJ) + Casualty loss after $500 exclusion  $64,000

2022 NOL Carryforward   $24,000

What am I missing?

[SilverknightFL]

You're numbers are good, but I think the odds of Ian becoming qualified in an election year are basically zero. If it hasn't happened yet, I don't think it ever will. We basically got screwed in a 150 mph sustained wind hurricane and OUR politicians didn't have the will to fight for us after the Bill was introduced. That includes the authors of the Bill who should have lobbied hard for people in Florida, Georgia, the Carolinas, etc.

But politics being what it is, I remember one of the FL reps or senators voting NO on super storm Sandy. So what would you vote if you represented NY or NJ?

With Ian impacting 2022 taxes filed in October 2023 (when my extension ended), time is not on our side, even with extensions, because no one cares:

Generally, you must file an amended tax return within three years from the date you filed your original return or within two years from the date you paid any tax due, whichever is later. If you filed your original return before the due date (usually April 15), it's considered filed on the due date. 

But if it were to happen, I'll have to amend 2022 and 2023.

[AmyC]

Since the bill is still sitting in the first stage with no progress, it seems very unlikely to move forward despite the incredible damage. I suggest you proceed.

Reference:

Hurricane Ian Bill

@JHtaxpayer 

[JHtaxpayer]

My research shows it has actually been embedded in H.R. 7024:  Tax Relief for American Families and Workers Act of 2024 which has now been read the second time and placed on the Senate Calendar under General Orders (Calendar No. 349).  That doesn't mean Schumer will bring it to the floor....in fact, he needs 9 Republicans to do so and there is sufficient resistance among a number of Republican Senators.  With only 14-15 weeks left in the session, it is unlikely.  But it might be worth filing an extension to find out.

[SilverknightFL]

Very good to know. We can always hope, although I hate doing amended returns even though it means more cash in my pocket.