Property and Casualty Losses Are Vexing, But They Shouldn’t be Taxing at Tax Time
Grab Your Camera, Go All Around Your Home, Record Your Belongings
By PRESS OFFICER
WASHINGTON, D.C.—– No one likes to think about it. But deductible casualty losses can result from a fire, a car crash, a theft, vandalism, storms, including a hurricane and tornado, sonic booms, earthquakes, and terrorist attacks. If you experience a loss, first, notify your insurance claims department or your insurance agent promptly. Then think itemized deductions. As the tax filing season continues anew, the AAA Mid-Atlantic Insurance Agency is encouraging home owners and renters to take time and create a home inventory list to avoid one less headache.
Research shows that more than half of American consumers do not have an inventory of the possessions they would want their insurance company to replace in case of a fire, theft, extreme weather, or other disaster, explains AAA Insurance. The inventory also comes in handy for tax purposes if you have losses that insurance does not cover. Be prepared for the sudden, unexpected, or unusual.
Sometimes it seems the next calamity or catastrophe is always lurking around the corner. If you suffer a loss, whether it stems from a casualty or theft loss or a disaster loss (including federally declared disaster areas), don’t have a panic attack. Unfortunately, it is part of the warp and woof of life. First things first: file an insurance claim, and remember, you might also be eligible to claim it, or to write a portion of the loss off on your federal income tax returns, according to the AAA Mid-Atlantic Insurance Agency. Complete Internal Revenue Service (IRS) Form 4684. Keep in mind: “You have to prove to the IRS that you are the rightful owner of the property,” tax consultants advise.
“Whether you’re a minimalist with few possessions or have rooms overflowing with stuff, a thorough home inventory can streamline the claims process and even help you verify losses for your income tax returns,” said Elise Burston, an Insurance Counselor with AAA Mid-Atlantic Insurance Agency in Washington, D.C. “Preparing in advance for an unexpected disaster could mean a little less stress along the way and a faster return to normal life.”
Casualty losses are generally deductible in the year the casualty occurred, according to the Internal Revenue Service (IRS). “Generally, you may deduct casualty and theft losses relating to your home, household items, and vehicles on your federal income tax return,” explains the IRS. “You may not deduct casualty and theft losses covered by insurance, unless you file a timely claim for reimbursement and you reduce the loss by the amount of any reimbursement or expected reimbursement,” the IRS continues.
While the prospect of building an inventory may feel daunting, there are many approaches. Begin by documenting your most valuable possessions. Note how much each item costs, when it was purchased and serial numbers, if applicable. Don’t forget the garage, basement, attic and storage shed.
Here are five easy steps to creating a home inventory list:
1. Grab your camera or smartphone and take a slow walk through your home. Take photos or a video of your possessions. Again, make sure to keep electronic copies in an easily accessible place. Photos and video you take with your phone may automatically be saved to cloud storage. Check your mobile phone plan details to be sure.
2. Create a list via paper, computer spreadsheet or mobile app. The Insurance Information Institute’s Know Your Stuff® home inventory app not only helps you record a comprehensive list of your belongings, organized by room, it also lets you input your insurance policy information, so you have everything you need in one place in case of losses. If you wish to use paper, make sure it is in a secured notebook.
3. Save your receipts when you make key purchases and store them with the inventory. Note the model and serial numbers of the items.
4. Add up the replacement costs for all of those items to make sure you have enough insurance. Double check, because not all policies cover the actual replacement costs. Also, in some cases, an additional endorsement may be needed for valuables like jewelry, cameras, furs, firearms, trading cards and comics, or other items. The availability of endorsements varies from state to state, however, so find out which endorsements are offered in your area.
5. Store your home inventory and related documents in a safe and easily accessible place. This can be done online, with friends or family, or in a safe deposit box. Don’t rely solely on your home computer, which should always be backed up, in case of fire or a hard drive crash.
“Creating a simple home inventory helps you track what you own and what it is worth,” added Burston. “It can be invaluable in deciding how much insurance coverage you need, to say nothing of ensuring you are adequately protected if you ever need to file a claim.”
The nation’s 2017 tax filing season opened January 23, and tax returns are due April 18 this year.
Taxpayers can file the loss on Form 1040, Schedule a (PDF), Itemized Deductions, (or Schedule A in Form 1040NR (PDF), if you are a nonresident alien). However, if your property is personal-use property or isn’t completely destroyed, the IRS advises, the amount of your casualty loss is the lesser of:
• The adjusted basis of your property, or;
• The decrease in fair market value of your property as a result of the casualty.
“The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date, the IRS explains. “In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday—April 17. However, Emancipation Day—a legal holiday in the District of Columbia—will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 18, 2017. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.”
AAA Insurance offers coverage for cars and home, life and health, travels, business and more. To find out more about homeowners, condo, or renters insurance, contact your AAA Insurance agent or call 866-636-2377 or 202-481-6811 to review eligibility for discounts and any coverage you might need.
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