This section discusses the special rules that apply to
Presidentially declared disaster area losses. It contains information
on when you can deduct your loss, how to claim your loss, how to treat
your home in a disaster area, and what tax deadlines may be postponed.
It also lists Federal Emergency Management Agency (FEMA) phone
numbers. (See Contacting the Federal Emergency Management Agency
Presidentially declared disaster is a
disaster that occurred in an area declared by the President to be
eligible for federal assistance under the Disaster Relief and
Emergency Assistance Act.
When to deduct the loss.
If you have a casualty loss from a disaster that occurred in a
Presidentially declared disaster area, you can choose to deduct that
loss on your return or amended return for the tax year immediately
preceding the tax year in which the disaster happened. If you make
this choice, the loss is treated as having occurred in the preceding
Claiming a qualifying disaster loss on the previous year's return
may result in a lower tax for that year, often producing or increasing
a cash refund.
If you do not choose to deduct your loss on your return for the
earlier year, deduct it on your return for the year in which the
You are a calendar year taxpayer. A flood damaged your home this
June. The flood damaged or destroyed a considerable amount of property
in your town. The President declared the town a federal disaster area
as a result of the flood. You can choose to deduct the flood loss on
your home on last year's tax return.
Disaster loss to inventory.
If your inventory loss is from a disaster in an area declared by
the President of the United States to be eligible for federal
assistance, you may choose to deduct the loss on your return or
amended return for the immediately preceding year. However, decrease
your opening inventory for the year of the loss so that the loss will
not be reported again in inventories.
Home made unsafe by disaster.
If your home is located in a Presidentially declared disaster area,
your state or local government may order you to tear it down or move
it because it is no longer safe to live in because of the disaster. If
this happens, treat the loss in value as a casualty loss from a
disaster. Your state or local government must issue the order for you
to tear down or move the home within 120 days after the area is
declared a disaster area.
Figure your loss in the same way as for casualty losses of
personal-use property. (See Figuring a Loss, earlier.) Use
the value of your home before you move it or tear it down as its FMV
after the casualty.
Your home will be considered unsafe only if both of the following
- Your home is substantially more dangerous after the disaster
than it was before the disaster.
- The danger is from a substantially increased risk of future
destruction from the disaster.
You do not have a casualty loss if your home is unsafe due to
dangerous conditions existing before the disaster. (For example, your
house is located in an area known for severe storms.) This is true
even if your home is condemned.
Because of a severe storm, the President declared the county you
live in a federal disaster area. Although your home has only minor
damage from the storm, a month later the county issues a demolition
order. This order is based on a finding that your home is unsafe due
to nearby mud slides caused by the storm. The loss in your home's
value because the mud slides made it unsafe is treated as a casualty
loss from a disaster. The loss in value is the difference between your
home's FMV immediately before the disaster and immediately after the
How to deduct your loss in the preceding year.
If you choose to deduct your loss on your return or amended return
for the tax year immediately preceding the tax year in which the
disaster happened, include a statement saying that you are making that
choice. The statement can be made on the return or can be filed with
the return. The statement should specify the date or dates of the
disaster and the city, town, county, and state where the damaged or
destroyed property was located at the time of the disaster.
Time limit for making choice.
You must make this choice to take your casualty loss for the
disaster in the preceding year by the later of the following dates.
- The due date (without extensions) for filing your income tax
return for the tax year in which the disaster actually
- The due date (with extensions) for the return for the
preceding tax year.
If you are a calendar year taxpayer, you ordinarily have until
April 15, 2002, to amend your 2000 tax return to claim a casualty loss
that occurred during 2001.
Revoking your choice.
You can revoke your choice within 90 days after making it by
returning to the Internal Revenue Service any refund or credit you
received from making the choice. However, if you revoke your choice
before receiving a refund, you must return the refund within 30 days
after receiving it for the revocation to be effective.
Figuring the loss deduction.
You must figure the loss under the usual rules for casualty losses,
as if it occurred in the year preceding the disaster.
A disaster damaged your home and destroyed your furniture. This was
your only casualty loss for the year. The area was later determined to
warrant federal assistance. The cost of your home and land was
$134,000. The FMV immediately before the disaster was $147,500 and the
FMV immediately afterward was $100,000. You separately figured the
loss on each item of furniture (see Figuring the Deduction,
earlier) and arrived at a total loss for furniture of $3,000.
Your insurance did not cover this type of casualty loss, and you
expect no reimbursement for either your home or your furniture.
You choose to amend your previous year's return to claim your
casualty loss for the disaster. Your adjusted gross income on your
previous year's return was $71,000. You figure your casualty loss as
||FMV before disaster
||FMV after disaster
||Decrease in FMV (line
2 - line 3)
||Smaller of line 1 or line
||Subtract estimated insurance
||Loss after reimbursement
||Loss after $100 rule
||Subtract 10% of $71,000
||Amount of casualty loss
Claiming a disaster loss on an amended return.
If you have already filed your return for the preceding year, you
can claim a disaster loss against that year's income by filing an
amended return. Individuals file an amended return on Form 1040X.
How to report the loss on Form 1040X.
You should adjust your deductions on Form 1040X. The instructions
for Form 1040X show how to do this. Explain the reasons for your
adjustment and attach Form 4684 to show how you figured your loss. See
Figuring a Loss, earlier.
If the damaged or destroyed property was nonbusiness property and
you did not itemize your deductions on your original return, you must
first determine whether the casualty loss deduction now makes it
advantageous for you to itemize. It is advantageous to itemize if the
total of the casualty loss deduction and any other itemized deductions
is more than your standard deduction. If you itemize, attach Schedule
A (Form 1040) and Form 4684 to your amended return. Fill out Form
1040X to refigure your tax on the rest of the form to find your
You should keep the records that support your loss deduction. You
do not have to attach them to the amended return.
You do not have to include grants received under the Disaster
Relief and Emergency Assistance Act in your gross income. However, you
cannot deduct a casualty loss to the extent you are specifically
reimbursed for it by the grant.
Federal loan canceled.
If part of your federal disaster loan was canceled under the
Disaster Relief and Emergency Assistance Act, it is considered to be
reimbursement for the loss. The cancellation reduces your casualty
Special rules for main home in a disaster area.
Special rules regarding gains may apply to insurance proceeds you
receive because of the damage to or destruction of your main home
(whether owned or rented) or its contents. For a discussion of these
rules, see Gains Realized on Homes in Disaster Areas in the
instructions for Form 4684.
Postponed Tax Deadlines
The IRS may postpone for up to 120 days certain tax deadlines of
taxpayers who are affected by a presidentially declared disaster. The
tax deadlines the IRS may postpone include those for filing income and
employment tax returns, paying income and employment taxes, and making
contributions to a traditional IRA or Roth IRA.
If any tax deadline is postponed, the IRS will publicize the
postponement in your area and publish a news release, revenue ruling,
revenue procedure, notice, announcement, or other guidance in the
Internal Revenue Bulletin (IRB).
Who is eligible.
If the IRS postpones a tax deadline, the following taxpayers are
eligible for the postponement.
- Any individual whose main home is located in a covered
disaster area (defined later).
- Any business entity or sole proprietor whose principal place
of business is located in a covered disaster area.
- Any individual who is a relief worker affiliated with a
recognized government or philanthropic organization and who is
assisting in a covered disaster area.
- Any individual, business entity, or sole proprietor whose
records are needed to meet a postponed deadline, provided those
records are maintained in a covered disaster area. The main home or
principal place of business does not have to be located in
the covered disaster area.
- Any estate or trust that has tax records necessary to meet a
postponed tax deadline, provided those records are maintained in a
covered disaster area.
- The spouse on a joint return with a taxpayer who is eligible
- Any other person determined by the IRS to be affected by a
Presidentially declared disaster.
Covered disaster area.
This is an area of a Presidentially declared disaster area in which
the IRS has decided to postpone tax deadlines for up to 120 days.
Abatement of interest.
In addition to postponing the tax deadlines, the IRS may grant an
extension to file income tax returns and pay income tax. In this case,
the IRS will abate the interest on underpaid income tax for the length
of the extension period and for the length of any postponement.
Contacting the Federal Emergency Management Agency (FEMA)
If you need to contact FEMA for general information, call
202-646-4600 (not a toll-free call) or visit
its web site at www.fema.gov.
If you live in an area that was declared a disaster area by the
President, you can get information from FEMA by calling the following
phone numbers. These numbers are only activated after a Presidentially
- 1-800-462-7585 if you are a
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