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.
1.
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.
2.
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.
3.
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.
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