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If your loss is not included in a federally recognized disaster area, you wont receive federal funds.
So, the first thing to do is to determine if you qualify by visitingDisasterAssistance.gov.
The remaining amount goes onto your itemized deductions, to offset taxable income, Stranger said.
Sadly, in practice, Stranger said shes seen few people actually benefit from casualty losses on their taxes.
How That Loss Is Determined
Heres how this would play out in practical terms, Stranger shared.
Determine Your Adjusted Gross Income
Next you must determine your adjusted gross income.
Thus 10% (or $24,000) reduces the loss above from $57,500 to $33,500.
Then this is reduced by another $100, to $33,400.
But this would not give much of a tax advantage.
The IRS website actually has some really good resources in terms of who to call, he said.
Theres a lot of thinking that has to go involved in that decision.
The first one is you have to know whether theres a reasonable expectation of reimbursement.
You really cant figure out what your loss is until basically you know what your loss is.
you’re able to spread the income over three years under this special disaster distribution provision.
Its good to know your retirement plan can cover both your present and future.
Caitlyn Moorhead contributed to the reporting for this article.
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