Timing the Casualty Deduction
Casualty losses must generally be deducted in the tax year in
which the loss event occurred. However, if you suffered a loss in
a federally declared disaster area, you may deduct your loss in the
preceding year.
If you have already filed the preceding year’s
tax return, you must file an amended tax return, and figure the loss
and the change in taxes exactly as if the loss actually occurred in
that preceding year. If you did not itemize your deductions in that
preceding year, you can go back and add any other itemized deductions
(such as mortgage interest, taxes, charitable contributions, etc.)
that you would have been able to deduct in that year You generally
must make this choice by the due date (not including extensions) for
the tax return of the year that the loss actually occurred.
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Save Money If your losses were very large, and
exceed your income for the year, you may have a net
operating loss (NOL) for the year. You can carryback your NOL
2 years (3 years for losses related to federal declared disasters). You
don't have to be in business to claim an NOL due to a casualty or
theft loss, but the rules for claiming NOLs are fairly complex, and
we recommend that you consult your tax advisor for advice on the mechanics
of amending your prior year's return to claim this deduction. |
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