THE WANDERING TAX PRO
Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 45+-year veteran tax professional Robert D Flach.
When claiming a
casualty loss on your home it is treated as if you sold your home for its
market value on the day after the casualty.You home may have been worth $500,000 before the casualty, but if your “basis”
in the home is only $200,000 your loss deduction is limited to $200,000, plus
any insurance payments and less the statutory $100 and 10% of AGI deductions.
Your basis is the
purchase price of the home plus the applicable closing costs (legal fees, title
insurance, etc) paid at the purchase plus the cost of any capital improvements
made to the home over the years.
It is actually
possible to have a taxable gain from a casualty loss if the insurance and other
payments exceed your basis.