Disaster Losses May Be a Tax Gain.

Losses Ranging from Wildfire to Theft May Qualify for Deduction

LOS ANGELES -- An often-overlooked deduction may help turn a major property-casualty loss into a sizeable gain at tax time.

The deduction for unreimbursed casualty and theft losses allows uninsured property losses to be included among itemized deductions.

To qualify for the deduction, financial losses usually need to be substantial. Any significant catastrophe deductible or gap in insurance coverage -- from fire, flooding or earthquake, for example -- may qualify for tax deductions. Insured losses may range from wildfire damage to losses from theft, vandalism or robbery.

Generally, a loss can be deducted to the extent it exceeds 10 percent of a homeowner's adjusted gross income, less $100. If a property is used in a trade or a business, slightly different rules may apply, so it's important to seek assistance from a qualified tax preparer.

Homeowners who feel they qualify for these deductions should collect all receipts, insurance statements, any available police reports and other documentation, and present it to a tax preparer. You can also review the "Non-Business Casualty and Theft Losses" section of the Internal Revenue Service Web site at www.irs.gov and consult the Franchise Tax Bureau Web site at http://www.ftb.ca.gov to learn more about both federal and state guidelines for this deduction.

In regions of federally-declared disasters, such as the wildfires, tax filers may also be able to deduct the loss on their returns. The deduction can either be filed for the year in which the disaster occurred or for the year immediately preceding the year the disaster occurred.

The American Institute of Certified Public Accountants and the National Endowment for Financial Freedom have written and produced "Disaster Recovery: A Guide to Financial Issues" to help people affected by disaster minimize the financial impact of a catastrophic event. The guide contains important tax information and is being distributed by participating local chapters of the American Red Cross. The guide can also be accessed via the Internet at www.redcross.org. Additional information is also available from the IINC Web site at www.iinc.org.

IINC is a nonprofit, non-lobbying communications association representing the property/casualty industry. For more information, or to arrange an interview, please contact media relations at [phone].