Tax Pro Plus Winter Tax Tips: Reporting Casualty Losses - Were You Hit By Bad Weather?

From tornadoes to earthquakes to hurricanes, it was one busy summer for Mother Nature. Unfortunately, this means that a lot of taxpayers experienced destruction. If you're one of them, the loss of business or personal property may provide a deduction on your individual income tax return, but first you need to determine if the loss qualifies for a deduction.

A casualty is defined as the damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected or unusual. Events that could produce a casualty loss include floods, fires, earthquakes, tornadoes or terrorist attacks. Events that aren't unusual, such as a pet knocking over an antique vase, would not qualify as a casualty loss.

If you have experienced a casualty loss, you'll need to figure out what the lost property was worth; this is the fair market value. You also need to know the change in value of the property before the event compared to after the event. If the decline in value is less than your cost, then the smaller amount is used to determine the loss.

This amount is decreased by any insurance or other reimbursement you receive on the property. Sometimes reimbursements can actually lead to income from the casualty instead of a loss, in which case different rules may apply limiting the reporting of that income to the IRS.

The loss after insurance reimbursement is reduced by $100 and reported on Schedule A, Itemized Deductions. The aggregate total of all casualty losses will be reduced by 10 percent of your adjusted gross income.