Victims of Hurricane Ida may qualify for an IRS deduction; CPA explains the process

Damage from Hurricane Ida in Louisiana(Briana Kent)

NEW ORLEANS (WVUE) – Hurricane Ida left catastrophic damage in southeast Louisiana and many homeowners say they don’t like their insurance company’s response. But the IRS may be a way for some hurricane victims to get financial help.

Gérard Malatesta is the owner.

“Fundamentally, insurance companies don’t pay money,” Malatesta said.

Hurricane deductibles have been higher since Hurricane Katrina flooded parts of Louisiana in 2005 and for some Hurricane Ida victims this means they won’t get anything from their insurer because of their damages. do not exceed the deductible, leaving them to bear the repair costs.

This is where the IRS comes in. Income tax filers who have suffered damage from hurricanes can take advantage of a special deduction.

Richard Tullier is a former CPA and Senior Manager at Wegmann Dazet & Company.

“Typically you get what’s called an accident loss and that’s considered an itemized deduction,” Tullier said.

But he also noted that changes to the tax law in 2017 increased the standard federal deduction to $ 12,000 for individuals and $ 24,000 for couples, which may affect whether it is beneficial for a taxpayer to itemize and deduct storm damage.

“So let’s say you have a claim and you calculate that you lost about $ 10,000 and the insurance doesn’t cover, unfortunately you can’t use it because you don’t have enough others. deductions to replace your standard deduction. But there is hope, over the past five years there have been allowances by the IRS to allow people to claim these losses without itemizing the deductions, ”Tullier said.

He explained how to determine the losses that would be included on IRS Form 4684.

“Usually whatever your insurance company tells you about your damages is a good place to start. Unfortunately at the moment some of those estimates are a bit low, so you are allowed to get, for example, a contractor’s estimate, and compare it to what your insurance company provides, and this difference becomes your deduction. There’s a calculation where you take that difference, and you basically take 90% of that difference and that’s your tax deduction, ”Tullier said.

And Tullier was asked what documentation income tax filers should have related to the damage caused by Hurricane Ida.

“So to claim the loss you don’t need to provide anything other than signing the return and this form, but if they ever come back, the rule is that if it’s less than $ 5,000, l ‘IRS trusts you wholesale,’ he said. .

But there may be a more in-depth review for amounts over $ 5,000.

“When it goes over $ 5,000, they really want to see something that shows either the repairs actually done or the contractor’s estimate that that damage occurred,” Tullier said.

Tullier said it could be a few months before the IRS issues guidance on whether it will allow IDA victims to claim property losses without itemizing deductions on their tax returns. income.

“Normally they arrive after the end of the year, so unfortunately we’re probably not going to get clear advice until January,” he said.

Malatesta thinks that loss deduction could be of great help to a lot of people. “It would help a lot of people because a lot of people are in trouble right now, coming out of COVID in that, yes, not good,” Malatesta said.

Tullier said it has proven useful for victims of last year’s hurricanes in southwest Louisiana. “We’ve seen it after Laura with clients where it’s helped tremendously,” Tullier said.

He advises everyone to keep documentation of losses. “If it’s evacuation costs, the spoilage of food that insurance companies hate paying, anything related to this hurricane, gasoline for your generators, try to keep a little log of it all because it will all benefit, ”Tullier said.

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