Casualty Losses: Accelerate the Refund

Irma's gone, but she managed to do quite a lot of damage before making her trek north. Now, as we pick up the pieces, maybe there's a ray of sunshine peeking around the clouds, and relief can be found in the form of a tax benefit. In a federally declared disaster area, casualty losses can be accelerated and deducted on a prior year tax return. The decision when to deduct the loss is at the taxpayer's discretion, and therefore, Hurricane Irma casualty losses can be deducted on either the 2016 or 2017 income tax return.

Casualty losses arise from an identifiable event that is sudden, unexpected, or unusual in nature. Examples of events that qualify include natural disasters such as tornadoes, hurricanes and earthquakes, as well as fires, automobile collisions, theft and vandalism.

For tax purposes, casualty losses are divided into three categories, each with differing tax treatments. The category of loss will depend upon the use of the affected property. The categories are: