Winter Storm Damage to Home (Texas)

[Lakepapa]

The wooden deck attached to my home (bought in 2006) was damaged during the freeze in Texas this February. Several footings cracked and the deck settled which now requires repair. Estimates for repair are in the $6-$7k range. My insurance did not cover the loss. 

Question: How do I separate out/determine the value of the deck from the value of the house when filling out the form in turbotax? Determining the damage to a car, boat, etc. is fairly straightforward but the deck is attached to the house and I'm unclear on how to separate the value of the deck from the value of the house for claim purposes.

Thanks in advance

[ReneeM7122]

For major home improvements like a new deck, you don't have to separate the value of the old deck from the home itself.  The benefit of the improvement comes when you sell the house because the amount you spend to build the new deck will offset your capital gains tax.  You pay capital gains tax on the difference between your "adjusted basis" and your sale price. The basis is your purchase price, and the deck is part of the adjustment. The house minus the deck cost is the adjusted basis.  As an example, if you bought the house for  $200,000 and sell for $250,000, that's $50,000 in gain. If you spent $10,000 on the deck, you subtract that so there's only $40,000 in profit that you would pay tax on.  That's your adjusted basis.

[Lakepapa]

Sorry, I should have been more clear in my question. What I'm trying to do is figure out what figure to use in my claim for loss during the declared disaster (freeze) in Texas earlier this year. I'm in the process of trying to complete the "Casualty and Theft" portion in Turbotax and I want to make sure I enter the correct amounts. I see in your example where I could recoup the loss on the "back end" when we sell but this is our dream forever home. No plans to sell.

[DawnC · Accepted solution]

You are going to be asked the value of your property before the disaster and after the disaster.   The difference will be your casualty loss.  For example your entire home including the deck is value at 100K before the storm, but after the storm you have property valued at 93K.   Your loss will come from the difference in value before and after the incident, 7K.   You don't have to separate the deck value; you can calculate the loss on the entire property.   

To compute the deductible casualty loss, taxpayers need to determine: (1) the difference between the fair market value immediately before and immediately after the casualty; and (2) the adjusted basis of the property (usually the cost of the property and improvements). Taxpayers may deduct the smaller of these two amounts minus insurance or any other form of compensation received or expected to be received. One method of determining the decrease in fair market value is an appraisal. 

The cost of repairs may, in certain cases, be used to measure the decline in fair market value, but it cannot be used by itself to determine the amount of the loss. When the cost of repairs is determined to be a fair measure of the decline in fair market value, then all you have to do is take the fair market value before the casualty and reduce it by the cost of repairs to arrive at the fair market value after the casualty.    The above comes from -  FAQs for Disaster Victims - Casualty Loss (Valuations and Sections 165 (i))

[Nabbarrios]

Hello,

I'm going through the same thing (except with a busted pipe and water damage to flooring) so thank you for your response!

What I'm still confused about is when I'm asked to list the" individual property" that was damaged, do I put the entire house? Or do I put pipe and floors? 

If I put the home down, do I put the "cost or basis" as what I paid for it 10 years ago....or what it was appraised for this year? 

The water damage was isolated to just over 200 sq feet of carpet & tile downstairs and spanned across sections of  both the kitchen and living room, but I'll have to rip up the carpet of the entire living room.  I think the tile will be ok.  Do I claim just the damaged area, or everything that has to be replaced?

We have insurance, but our deductible is outrageous.

So far, we've repaired the pipe and wall/floorboards out of our own pocket, and had the carpet pulled back with industrial fans to dry.  We're pricing the cost to replace the carpet that was damaged....but I'm hoping to still come under the deductible.

Can I use the safe harbor chart for flooding in order to determine damage per square foot....or is that only for hurricane damage?

I'm so confused right now.

Any advice would be much appreciated. 

[DaveF1006]

First of all, the The De Minimis Safe Harbor Method is available for casualty or theft losses of $5,000 or less. According to this link, this only available for losses occurred in a federally declared disaster area. 

I would not declare the entire house as a casualty loss. I would put down the pipes, floors, wallboards, and floorboards as this would be a more accurate depiction of your loss.  As you go through the questions, you will need to enter the cost basis for what needed replacing. You probably don't have this information but use your best guess estimate.  Same in the next screen when it asks for FMV. For FMV, there was probably some deterioration to some of these items thus may be worth less than the original cost.  

Hopefully, this will get you started.  Holler if you have questions. Just an FYI, causality losses exclude the first 10% of your adjusted gross income (AGI) for the year, which means if your AGI was $60,000 for the year, $6000 of your loss will be excluded.