Today we hear from Don in Idaho who’d like to know, “Are the expenses paid out to repair damage caused by a mudslide deductible? The repairs include fixing the damage to the house, yard and the cost of a massive retaining wall to prevent a like event from recurring.”
That sounds like a casualty loss to me. Use Form 4684, Casualty and Theft Losses
IRS has a workbook for personal casualties, that explains what factors to take into account.
You will need to know the fair market value of the home before the damage and after the damage.
You will need to know the amount of the insurance reimbursement, if any.
It’s a little complicated. So, I suggest you get an experienced tax professional to help you with this. That way, it will be done correctly the first time.
The first time I ever filed a tax return with a casualty loss, it was for a partnership with a building that was burned down the week after they bought the complex. That partnership return was pulled for audit almost instantly. It all turned out all right. But it was a bit scary.
These days, with all the Katrina and other Presidential Disaster filings, your tax return won’t stand out.
And remember, you can find answers to all kinds of questions about casualty losses and all kinds of other tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the subscribe link and join us.]
- Ask TaxMama :: Where taxes are fun and answers are free
- TaxQuips :: The number ONE tax podcast online
- IRS Form 4684 :: Casualty and Theft Losses
- IRS Publication 584 :: Casualty, Disaster, and Theft Loss Workbook