Disasters may yield deductions
By HELEN HUNTLEY
Published January 23, 2005
Did one of Florida's hurricanes send a tree crashing through your roof last year? Did the hurricanes or the Asian tsunami inspire you to new levels of generosity? If so, your disaster-related expenses are potential tax breaks.
If you itemize deductions, you can deduct your contributions to qualified charities and you may be able to deduct a portion of your uninsured casualty losses.
Providing shelter for friends who live in an evacuation zone is a charitable act, but it won't earn you any credit with the IRS. To deduct your donations, the recipients must be organizations that qualify under IRS rules. You can find a list of many of them in IRS Publication 78, which can be searched online on the IRS Web site (www.irs.gov) or you can get a paper copy by calling toll-free 1-800-829-3676. Churches, synagogues and mosques qualify, even if they are not on the list.
The general rule is that your charitable deduction cannot be more than half your adjusted gross income, although a lower limit applies in some circumstances. In most cases, both money and the value of noncash donations, such as securities and supplies, can be deducted.
Congress also passed an unusual tax break to reward tsunami relief donors. If you donate to the relief effort during January, you can choose whether to take a 2004 or a 2005 deduction as long as the contribution was made by cash, check or credit card. If you sent relief supplies this month, you'll have to wait for your 2005 return to deduct their value.
Keep receipts or some kind of written documentation for your donations. If any of your contributions is $250 or larger, you must have a written acknowledgement from the organization.
Casualty losses that are not reimbursed by an insurance company are deductible to the extent that they exceed 10 percent of your adjusted gross income plus $100 for each incident. You can combine all losses during the year to meet the 10 percent threshold, but you'll have to add $100 for each hurricane if more than one damaged your property.
The casualty loss deduction is calculated on Form 4684 based on the change in the value of your property as a result of the storm.
Even if you haven't gotten your insurance check yet, do not claim a loss for any amount you expect will be reimbursed. If you do claim a loss and later receive reimbursement, the insurance check will be all or partly taxable.
[Last modified January 23, 2005, 00:13:14]
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