IRS Tax Relief For SC Flood Victims: Calculating Casualty Loss
The early October, 2015 flooding, and corresponding dam breaches, in Columbia South Carolina resulted in catastrophic loss to a number of areas. Although meteorologists predicted severe rainfall for days preceding the storm, dam owners did little to nothing to prepare. At least 15 people died from flood-related damage, dozens of homes were lost. Thousands of others were forced to evacuate their homes.
The process of rebuilding has begun, but for many families facing extreme personal, and real property losses, the future seems grim. If you suffered losses as a result of the storm, and compensation for your claim has been denied by your insurance company, you should file for a tax credit on your 2015 taxes.
Tax Relief: Reporting your casualty loss on Form 4684 and Schedule A
The Internal Revenue Service allows victims of disasters, including flood related damage, or theft to submit a casualty loss. The form may be obtained here. Expenses incurred which are considered tax deductible, include the cost of property damage, repair, and loss, as well as any relocation costs incurred if the home or other property is otherwise cannot be salvaged and/or if the government denies you the right to rebuild. For purposes of the tax credit, a casualty loss is described as damage, destruction, or loss of your property from any sudden, unexpected, or unusual event (to include a flood). It does not include normal wear and tear or progressive deterioration.
To claim a casualty loss, you must be able to prove the loss occurred. For South Carolina’s victims, the Federal Emergency Management Agency (FEMA) has issued a list of 16 counties across the state affected by flooding: Berkeley, Calhoun, Charleston, Clarendon, Darlington, Dorchester, Florence, Georgetown, Horry, Kershaw, Lee, Lexington, Orangeburg, Richland, Sumter and Williamsburg Counties. These 16 counties should qualify for IRS assistance this tax season, for the 2014 or 2015 tax season, depending on when the individual prefers to claim the loss this tax season, or amend tax returns to include the loss last tax season.
When calculating a casualty loss, you should hire an appraiser to determine the difference in the fair market value immediately preceding the flood and the fair market value after the flood.
The cost of repairs made after the flood may also be considered provided:
- necessary repairs were actually made;
- the amount spent on repairs was reasonable;
- repairs are specific to damage actually caused by the flood;
- the value of the property after repairs are made does not exceed the value of the property preceding the flood
You should also consider including a copy of your current insurance policy for personal household contents to further support the value of impacted items.
Reporting the Loss
Form 4684 requires the tax payer submitting the loss to list:
- The adjusted basis in the property before the casualty loss.
- The decrease in fair market value as a result of the loss.
- The taxpayer then subtracts any insurance or alternative reimbursement payments (including FEMA funds), from the lesser of these two numbers.
This may seem like a complicated process, but for those suffering because of the devastation across South Carolina, this tax relief can be the difference between rebuilding a life, or struggling to make ends meet. Any questions regarding tax relief and debt assistance can be directed to a tax attorney.