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We experienced a flood at our home in Dec of 2015. By the time the home was repaired we had spent more than FEMA paid out. Is the difference tax deductible?

If deductible should it be filed on 2016 taxes since the repairs were not completed until 2016
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Level 5

We experienced a flood at our home in Dec of 2015. By the time the home was repaired we had spent more than FEMA paid out. Is the difference tax deductible?

The difference may be claimed as a Casualty loss However, you cannot claim in in 2016.  According to the IRS "Casualty losses are generally deductible in the year the casualty occurred. However, 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 the disaster happened, and you can deduct the loss on your return or amended return for that preceding tax year."

If you want to amend your prior year, you can include it there.

The software will walk you through it, but here is how it works: Individuals are required to claim their casualty and theft losses as an itemized deduction on Form 1040, Schedule A Itemized Deductions. 

  1. For property held by you for personal use, Subtracted any salvage value (zero for theft) and any insurance or other reimbursement from the loss amount.
  2. Then, subtract $100 from each casualty or theft event that occurred during the year. 
  3. Then, take that amount and subtract 10% of your adjusted gross income from that total to calculate your allowable casualty and theft losses for the year.
  4. That's the amount that goes on your Schedule A Itemized Deductions.

If your property is personal-use property or is not completely destroyed, the amount of your casualty loss is the lesser of:

  • The adjusted basis of your property, or
  • The decrease in fair market value of your property as a result of the casualty

More details can be found at this link

That said, the amount would have to be pretty large for you to be able benefit.  Also, you must file Schedule A as I stated above.  But, if you want to give it a shot in the Casualty and Theft section of the software, it wouldn't hurt.

How to enter it into TurboTax: While inside the software and working on your return, type casualty loss in the Search at the top of the screen (you may see a magnifying glass there).  There will be a popup that says Jump to casualty loss.  Select that to get to the general area. 


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