It’s that time of year again. News agencies love it. Insurance companies hate it. Innocent people just trying to live their lives live in fear of it. Fires, hurricanes, tornadoes, flash floods, mudslides, etc.

Fires seem to last the longest and usually cause the most overall damage, but hurricanes and tornadoes can cause similar damage.

You hear about one of these events, see pictures of the devastation, and silently pray for the victims while thanking God that your belongings are not affected… yet.

Have you ever wondered why presidents are so keen to jump on the bandwagon and declare “disaster areas”? (They are usually urged to do so by the governor.) If your loss occurs in a presidentially declared disaster area, you are entitled to claim the loss from the disaster on your tax return. Otherwise, you can claim ZERO deductions. This applies to individuals and businesses.

Note: We’re talking about catastrophic losses. Personal injuries aren’t limited to presidentially declared disaster areas. A personal injury is anything that wasn’t caused by a natural disaster. Let’s say you lost your home in a wildfire. That’s considered “catastrophic” loss and can only be deducted if the President declares your loss a disaster area. However, if your house burns down because gasoline-soaked rags in your garage were ignited by your water heater burner, that’s considered personal injury.

Businesses can write off their entire loss, less the amount of insurance. Individuals are subject to three limitations. First, they must do so through itemized deductions on Schedule A; second, they must deduct $100 from the maximum amount; third, they can only deduct amounts over 10% of their adjusted gross income. (If a married couple normally has only $10,000 in itemized deductions and normally takes the standard deduction of $27,700, they would have to have catastrophic losses over $7,700 to even be able to make a claim. Or, put another way, their catastrophic loss claim would only be for the amount over $7,700.)

Then there’s the question of timing. You may be able to choose which year you want to deduct the disaster loss. If your loss occurred this year, you can wait until next year when you file your 2024 tax return to claim the loss, or you can claim it now on your 2023 tax return. (If you’ve already filed your 2023 tax return, you can file an amended 2023 return and claim the disaster loss.)

FYI: Congress is considering changing the disaster loss reporting rules to allow a deduction without the itemization requirement. The House has passed it, but the Senate is currently delaying it.

Did you hear it? Judges 20:41 says, “Then the men of Israel turned, and the men of Benjamin were distressed, for they saw that the evil had come upon them.”

Kelly Bullis is a CPA in Carson City. You can reach him at 775-882-4459. He is online at BullisAndCo.com. He is also on Facebook.