Is Storm Damage Tax Deductible?

2/10/2020 (Permalink)

Colorado storms—whether they bring heavy snow, rain, or hail—have the potential to cause millions of dollars in damages for home and business owners. And, because our weather patterns here are so unpredictable, damaging storms are often impossible to prepare for. 

This climatic feature of our state can create a concerning scenario for anyone who has a vested interest in maintaining the condition of any real estate in Colorado, whether commercial or residential. Here among the Rockies, damaging storms are almost always just around the corner. 

To be sure, Colorado roofing firms and general contractors are always hopping busy. It’s clear this is one of the most profitable places for restoration companies to thrive. And, because of the frequency of damaging storms, a common question arises: “Is storm damage a tax deductible loss?”

At SERVPRO of Parker/Castle Rock, we specialize in providing the advanced, comprehensive restoration services that are needed to fix the damage caused by storms in Colorado. We work with both businesses and homeowners, and we’ve seen just about the worst that storms can do (along with the most costly damages you can imagine). 

So, we know a thing or two about the expenses associated with storm damage. 

The Answer Is: It Depends

As you likely know, if you earn money in Colorado, you owe taxes both to the state and to the federal government. 

When you incur a casualty loss—which is the technical, ‘tax term’ for storm damage—your deductions on your state taxes will likely not change. That is, unless you were affected by a national disaster, in which case you’ll want to complete a specific form when you file. More information on this unique kind of state tax deduction can be found here. 

However, when it comes to filing your federal taxes, there are possible tax deductions for which you might be eligible. A few important conditions must be met, though, in order for your deduction to be legitimate: 

• Your property must have suffered a loss to its fair market value (FMV) because of a casualty event. This could be much more than a storm, by the way—damage caused by landslides, tornadoes, and even falling aircraft can qualify as casualty losses.
  
  

• If your property was insured, you must complete a timely claim for reimbursement by your insurance company. Uncle Sam wants you to recoup your costs as much as you can before you file for any deductions. Any losses you incur that were not included in your insurance reimbursement would qualify for a deduction, minus a few ‘administrative’ subtractions.
  
  

• You must deduct $100 and 10% of your Adjusted Gross Income (AGI) from the calculated loss. Let’s say storm damage destroyed your roof and you need a completely new one. But, your insurance company will only pay for $25,000 of the $30,000 bill. You would take the $5,000 difference, reduce it by $100, and then subtract 10% of your AGI in order to arrive at the proper deduction.
  
  

• You must file this deduction during the tax year when the damage occurred. The only exception to this rule is if your property was located in a designated national disaster area, in which case you have other options for what tax year you can file your deduction in.
  

For some property owners who work from home, it might be tempting to deduct any loss of income you might have experienced because of storm damage. Unfortunately, the federal government doesn’t consider this a qualifying condition for a tax deduction. 

Commercial properties or income properties are treated slightly differently by the IRS, and it’s advisable to consult with a tax professional in the event your business or income property was damaged by a storm and that damage prevented your property from producing an income. Depending on the extent of the damage and how much income was lost, you could qualify for more than one federal tax deduction.

For Storm Damage Cleanup, Go with the Pros 

Even though the tax code may be complex and confusing, working with SERVPRO to restore your storm-damaged property won’t be. We specialize in doing the ‘dirty work’ required to bring damaged property back from dereliction and destruction at the hands of Mother Nature. 

Our team is expertly trained to swiftly and effectively restore damaged property so that the disruption to your life or business is reduced as much as possible. 

Looking for top-tier storm damage restoration? Give SERVPRO of Parker/Castle Rock a call today, at (720) 842-1950.