Don't Mess With Taxes

I was delighted to see that Sanibel, the lovely island on Florida's Gulf Coast that I was worried about in this earlier post, came through Tropical Storm Fay unscathed.

Many other Sunshine State residents weren't so lucky.

Gerry Willis, personal finance writer for CNN, has some insurance tips for those storm-battered folks. You can watch a video version here.

Elsewhere on CNN, a Willis article from about a year ago looks at the damages that a lot of homeowner polices don't cover. That's always good, although very distressing, to know.

Flimjo also makes that same point in his post, Lessons from Tropical Storm Fay.

Today's Tax Tip: Now here's my tropical storm tax tie-in. If you don't have insurance or it doesn't cover many, any or most of your losses, be sure to take advantage of the casualty loss deduction.

One of the drawbacks of this tax deduction, which is found on Schedule A meaning you have to itemize to claim it, is that you must subtract out all your insurance reimbursements before you can calculate your tax relief.

As the saying goes, it truly is an ill wind that blows no good. In this case, the ill winds might have ripped up your property, but when there's no or little insurance, a tiny bit of good comes in the form of a potentially larger tax break. Now you can use all of your eligible storm losses to figure out if you can get some money back from Uncle Sam to help you make repairs.

If your storm-ravaged area doesn't make the major, presidentially declared disaster area list (you can check this IRS page or this FEMA one to see if it does eventually show up), you have to wait until next year to file the claim on your 2008 tax return.

If, however, you're unfortunate enough to take a hit that gets you the special treatment (blogged about here), you can file an amended return and get that tax money this year.

That presumes of course, you meet all the requirements. You can find out the casualty loss tax rules and filing tips in these documents and Web pages:

• Tax relief in disaster situations
• FAQs for disaster victims
  
• Publication 547, Casualties, Disasters and Thefts
• Publication 584, Casualty, Disaster and Theft Loss Workbook
• Disaster losses
• Amended returns
• Government help for disaster victims
• Tax breaks for casualty, diaster victims