Follow the Three Cardinal Rules for Deducting Casualty Losses ๐Ÿšจ๐Ÿ’ธ๐Ÿ’” - Palma Financial

Is your wallet ready for the next big disaster? ๐ŸŒช๏ธ๐Ÿ’ธ Brace yourself becauseย emergencies strike unexpectedly in the US and wreak havoc on personal finances.ย ๐Ÿ’ฅ With 20 Presidential disasters already declared by March 2023, you can’t afford to be caught off guard. โš ๏ธ

Keep in mind that you get a tax break for casualty losses for immediate relief.๐Ÿ’ฐ

Here are the three critical rules to follow when claiming a casualty loss deduction:

๐Ÿ‘‰๐Ÿปย Ascertain the extent of physical damage:ย Only losses stemming from physical damage are eligible for deduction. Losses that arise from decreases in property value or future casualty probabilities are not eligible.

๐Ÿ‘‰๐Ÿปย Identify the cause of the damage:ย Eligible losses must be caused by specific events such as fire, storm, shipwreck, or another casualty that is an independent and sufficient cause.

๐Ÿ‘‰๐Ÿปย Compute the deduction:ย Deduct the difference between the property’s market value and before and after the casualty.


๐Ÿ’ฒ To qualify for the deduction, the losses incurred must be uninsured or claimed promptly on insurance and exceed $100.

๐Ÿ’ธ The losses must exceed 10% of adjusted gross income and not surpass the adjusted basis in the damaged property.

๐Ÿ—“๏ธ If you incur a casualty loss in a declared disaster, you can deduct it from the previous taxable year for immediate relief.

โš ๏ธ Protect yourself! Review your insurance policies, build an emergency fund, create a disaster plan, and do not forget…ย Schedule your assessment with us!