There’s never a good time to plan for a disaster. There’s never a better time either. So why wait? Instead of having to reconstruct personal and business records in the aftermath of an unexpected calamity, safeguarding documents before you suffer a loss will make it easier to claim casualty deductions and other tax breaks.
Here’s an overview of some of the paperwork to include in your disaster preparedness plan and why you’ll need it.
Purchase and acquisition information. The amount of a casualty loss is generally the lesser of your adjusted basis or the reduction in your property’s fair market value due to the casualty. With the exception of gifts, inheritances, and certain other property, adjusted basis typically equals what you paid for your assets plus improvements, reduced by depreciation or other reductions.
Tip: Make duplicates of titles, mortgages, closing papers, and receipts or scan them into digital form. Store the originals and the copies in separate locations, preferably in fire- and water-proof containers.
Prior-year tax returns. When your loss occurs in a presidentially declared federal disaster area, you can amend an already filed prior-year federal return to claim the deduction and the resulting tax refund.
Detailed inventory. As a general rule, you’re required to reduce the amount of your personal property casualty losses by $100. In addition, losses must exceed 10% of your adjusted gross income (except in federal disaster areas). A list of your possessions, supplemented by photographs or a video, is essential for maximizing your deduction.
We’re here to help you with pre-crisis management and recovery planning for your personal and business assets. Please call if you would like to schedule a review.
Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.