In October 2016, Beaufort County and other South Carolina jurisdictions were hit by Hurricane Matthew, which did substantial damage. Again in September 2017, Hurricane Irma caused damage in our area.
While FEMA delayed in declaring various South Carolina counties official disaster areas, eventually it happened, making disaster victims eligible for filing and attaching form 4684 to their 2017 Federal income tax reporting.
Form 4684 can also be used to report loss due to theft if the loss meets the criteria for claiming a loss against 2017 reported income.
The loss can be claimed the year it occurred, the year prior with the filing of an amended return or the year forward if warranted.
For people who sustained hurricane damage in 2016, you have until Oct 2020 to file an amended return to claim hurricane damage. For 2017 damage, you have until 2021 to file an amended return.
Before filing, make sure the filing is justified. First, tally up the losses. Use the instructions for Form 4684 as the starter.
If the loss is a result of fire, storm or other casualty, see IRS Publication 547 for help in identifying and memory jogging of assets lost. There is an accompanying publication for business looses.
Add up the losses. Subtract any insurance reimbursement. Subtract 10 percent of the AGI for the year of loss, and subtract $100. The remaining balance is then added to line 20 of your Schedule A itemized deductions.
If you normally don’t file an itemized deduction, you will need to review other expenses to see if you qualify. See your tax advisor for more information.
There are some losses such as cash, declines in the stock market, normal wear and tear, and other normal age-related deterioration of property. See Publication 527 and the instructions for Form 4684 for more information.
Under the new tax codes, casualty deductions might be limited to FEMA-declared disaster areas. The new tax bill was written in a hurry without time allowed for Congressional review or public input.
Changes to the tax bill have been made and more are coming. Perhaps this issue will be included.
Virginia Moryadas is a tax preparation professional in Bluffton.