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This is the second of a two-part answer explaining the federal tax deduction for nonreimbursed losses from superstorm Sandy.
I wrote last week that casualty losses are deductible only to the extent that they exceed 10 percent of your adjusted gross income. If your income is $100,000, for example, you can only deduct losses above $10,000.
Your deductible loss is also reduced by reimbursements you receive from insurance and government assistance. If it's still unclear how much reimbursement you'll get, use an estimate.
It's better to err on the conservative side. If your estimate's too low, you'll claim too large a deduction and give some of it back in the form of higher 2013 taxable income, says Michael Alderman, an East Meadow tax accountant. If you overestimate your reimbursement, you'll take too small a deduction. In that case, you can take another deduction in 2013 -- but only if it exceeds 10 percent of your 2013 income.
Let's assume your Form 4684 calculation shows your Sandy loss is $69,900. If 10 percent of your 2012 income is $10,000, you can claim a $59,900 casualty loss deduction on Schedule A of your 2012 return. But until April 15, you have an alternative option, says Alderman. Because Long Island was a federally-declared disaster area, you can choose to claim your loss in the tax year before the event, by filing an amended 2011 return.
Crunch the numbers to see which option is best. If your adjusted gross income was smaller in 2011 than in 2012, your deduction will be bigger on your 2011 return. If your 2011 income was $60,000, for example, you could deduct losses of more than $6,000 on an amended 2011 return.
The bottom line Consult a tax professional on how to get the biggest benefit from your casualty loss tax deduction.
Websites with more information 1.usa.gov/V7yXhr and bit.ly/WM7lzD
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