Residents of 11 Wisconsin Counties may be eligible for a tax deduction related to losses sustained during a storm which occurred on January 31, 2011. Eleven counties - Dane, Dodge, Grant, Green, Iowa, Kenosha, Lafayette, Milwaukee, Racine, Walworth, and Washington were recently declared Federal disaster areas. This declaration may allow residents of the disaster area to claim a deduction related to losses from the January 31 storm on either their 2010 or 2011 tax return.
Special rules apply to Federally Declared Disasters which allow individuals to claim losses in the year before the year of the disaster. Individuals whose 2010 tax return is on extension can still claim the loss on their 2010 tax return. Individuals who have already filed their 2010 tax return can either claim the loss on their 2011 tax return or file an amended 2010 tax return to receive the benefit sooner.
To calculate the casualty loss, individuals should:
Determine the lesser of:
The adjusted basis in the property before the casualty or
The decrease in fair market value of the property as a result of the casualty
Take the amount calculated above, then subtract any insurance or other reimbursement that is received or expected to be received
This amount is the limited to the amount of the loss in excess of $100 and 10% of your adjusted gross income
"This deduction opportunity is designed to help individuals who are trying to recover from an unexpected loss," stated Juliet Urso, Tax Specialist at Reilly, Penner & Benton. "Because there are limitations to the deduction and people also have the opportunity to choose whether they would like to apply the deduction to their 2010 or 2011 tax return, it is important to consult your CPA to determine the best way to apply the deduction properly."
Special rules apply to Federally Declared Disasters which allow individuals to claim losses in the year before the year of the disaster. Individuals whose 2010 tax return is on extension can still claim the loss on their 2010 tax return. Individuals who have already filed their 2010 tax return can either claim the loss on their 2011 tax return or file an amended 2010 tax return to receive the benefit sooner.
To calculate the casualty loss, individuals should:
Determine the lesser of:
The adjusted basis in the property before the casualty or
The decrease in fair market value of the property as a result of the casualty
Take the amount calculated above, then subtract any insurance or other reimbursement that is received or expected to be received
This amount is the limited to the amount of the loss in excess of $100 and 10% of your adjusted gross income
"This deduction opportunity is designed to help individuals who are trying to recover from an unexpected loss," stated Juliet Urso, Tax Specialist at Reilly, Penner & Benton. "Because there are limitations to the deduction and people also have the opportunity to choose whether they would like to apply the deduction to their 2010 or 2011 tax return, it is important to consult your CPA to determine the best way to apply the deduction properly."