AFTER A CATASTROPHIC EVENT OR DISASTER
First,
remember to Plan, Prepare and Stay Informed. That is the start of any
successful recovery.
(Updated
September 29, 2017)
When a disaster
strikes it can damages your home or destroy it and your neighborhood. Your life
will change. The change may be temporary or permanent. Whether it’s a flood,
fire, hurricane, tornado, earthquake,
or winter storm or freeze, suddenly many of the necessities of daily life you
depend on will not work or are not available
– basics such as food, water, warmth, clean air may be impaired. Electricity,
and thus refrigeration, gas (heating & cooking), city water may be
interrupted. The ability to drive (due to injury or road damage) may be
impaired. You may need to evacuate quickly to obtain food, water, and shelter,
and to avoid imminent danger.
Your recovery should start as soon a possible, but first you need to secure
your family and pets. Mitigate, if possible, further property loss to minimize
financial losses.
Be prepared, many
of the tips below assume that you have made adequate provision and planned
ahead of time. An appropriate emergency kit with basics for safety and security
is a necessity, of course, but also tools for recovery including a digital
camera and a journal and pen.
Practice
the steps below to determine what your needs will be so that you can make
proper preparations for your family to have a successful response and
accelerate your recovery. THERE WILL BE CHAOS, ASSUME THAT YOU ARE ON YOUR
OWN.
Read these tips
frequently, be familiar with the steps. The first time you make pancakes you
need to read each instruction, After a few times you know what to do. You want
to have the same ease with the steps in this material.
Immediately After
the Event
The security and
safety of people and pets is your primary concern, you want to be safely out of
harm’s way, you should do the
following:
·
Do you have a plan in the event the
family is not all together. Where will you meet? Will that change depending
upon the day of the week or the time of day?
·
Make sure everyone is OK.
If anyone is injured, weak, extremely distressed, or has any other unusual symptoms, seek medical help
right away.
·
What do you have in your emergency
first aid kit that will be needed if medical help is not available?
·
If your home has
been severely damaged, turn off your gas and electricity if you can safely do
so. Your power lines and
gas lines may be damage. Let utility crews
turn them back on when they determine it’s safe.
·
Check up on your neighbors
-
Check on disabled persons, children who may be alone when the disaster strikes and elderly
people who may stay inside from fear or disability.
-
Check their electrical and gas
utilities, fires or explosions at neighbors’ property could increase your loss.
·
Don’t be in any
hurry to go back into your home.
There are many risks, from floors or ceilings giving way, live wires and gas leaks. Don’t
go in if the gas and electricity haven’t
been turned off, don’t turn on electrical switches or appliances in case they
may cause a spark that ignites a gas leak. Don’t try to turn the utilities back
on yourself once you have turned them off.
·
Report any downed
power lines or broken gas lines right away,
if at all possible. What is the number you should call to report the downed
lines ___________ or broken gas lines ___________?
·
Stay off the
roads unless you are evacuating so emergency workers can move quickly. Stay
out of their way as they work.
·
Keep listening to
the radio or TV for news
for instructions about where to go, what places
are dangerous (fallen trees, unsafe bridges, flooded streets), and how to
contact the local disaster relief services. Relief services can help with such immediate
needs as shelter, food, medicine,
eyeglasses, and clothing. Do you have an emergency radio that is not dependent
on electricity or batteries? Do you have an emergency supply of medicines?
·
If there is a fire
hydrant near your home, clear away any debris so the fire department has access to it.
·
Notify your
employer if you can’t get to work because of the disaster or need to attend to
the needs of your family.
Where is the nearest pay phone?
·
If there is any
damage to your property, contact your insurance agent or company. You
should have a list of emergency phone numbers including your insurance and
other important contacts. (The list should be in a place that all family
members have access to in case you cannot personally get to it.)
Necessities
·
Water. A
normally active person needs at least two quarts of water each day, and up to twice that much in hot weather. (That is just for
drinking.) Children, nursing mothers, and ill people need even more.
-
Disconnect the water line to the hot
water heater to keep contaminated water from spoiling the water in the tank. If
the water supply is disrupted, you can use water from your hot water tank, pipes, ice cube trays, or the reservoir tank of your
toilet (but not the bowl). You can also collect
rainwater and water from swimming pools, streams, rivers, ponds, lakes, and natural springs. But be sure you boil any water
you drink or use for cooking.
-
Don’t drink floodwater, it is likely
contaminated. Water in water beds have pesticides and other chemicals. Contact
with any water that is dark, has an
odor, or has any material floating in it must be avoided.
·
Food.
You’ll need to keep your strength up, so eat at least one
well-balanced meal each day. (Is your
emergency food supply adequate? Have you rotated items that will expire in the
next six months?)
-
If your stove isn’t working, you can
use a fireplace once you are sure that all gas has been flushed out o of the
home (if the chimney isn’t damaged), candle
warmers, chafing dishes, or fondue pots. Charcoal grills and camp stoves should only be used outdoors, and any
fire should be outdoors. Even in an
open carport, a fire can send sparks into the roof and start a house fire.
-
Canned food doesn’t need to be heated,
but if you want to heat food in the can, be sure to open the can and take off
the paper label first.
-
If you are without power and
refrigeration, first use up perishable food from the
refrigerator, then from the freezer. Open the refrigerator or freezer door only
when absolutely necessary, as that lets in heat.
·
Shelter.
The American Red Cross and other volunteer agencies may set
up shelters for people whose homes are too
dangerous to stay in. Their facilities may be overburdened. The Federal Emergency Management Agency (FEMA) can provide
housing assistance if your home was
damaged or destroyed. Call 800-462-9029 (TTY/TDD: 800-462- 7585).
·
Locating and
contacting family members. The American Red Cross maintains a database to help people find family members after a
disaster. Your family members in other cities can call their local chapters,
but should not call the chapter
in the disaster area.
Cautions
·
Electrical lines.
Don’t turn the electricity back on after a flood if the
system was flooded or if you smell gas.
Don’t handle electrical equipment in wet areas. Avoid puddles and other standing water -- you could get
a shock from underground or downed
power lines. Assume all wires on the ground are dangerous, including cable TV lines. If you have a generator, be sure to
use the proper size and type of power
cord; never run cords under rugs or carpets, and never connect the generator to another power source.
·
Natural gas,
propane, gasoline, and other flammables. Don’t
turn the gas back on after a flood.
Let the utility crews handle it. Use a flashlight, never matches or candles.
Beware of leaking gas lines and propane containers, gasoline that has leaked from vehicles, and lighter fluid or paint
thinner that has spilled.
·
Carbon monoxide. Using
fuel-burning devices (such as kerosene lamps, wood stoves, fireplaces, gas-powered pumps, and generators)
for indoor cooking, heat, or light can be very dangerous. The carbon monoxide
these devices give off is invisible
and odorless, but can be deadly. Provide plenty of ventilation and watch for
symptoms of carbon monoxide poisoning: mild headaches that persist or get worse, shortness of breath, irritability, poor judgment,
memory loss, or rapid fatigue. Never try
to heat your house with a gas stove. Never burn charcoal in the house or garage.
·
Floodwater.
Stay out of floodwater, as it can be surprisingly powerful.
Water only six inches deep can sweep you off
your feet. Floodwater is highly contaminated. Don’t eat or drink anything the floodwater has touched -- throw it out.
·
Unsafe buildings,
roads, bridges, and sidewalks.
Stay on the ground, as structures that are still standing may fall in on you or collapse under
you. Floods can erode roads and sidewalks.
·
Exposure. Watch
for symptoms of frostbite -- numbness and loss of color in the toes, fingers, nose, or ear lobes -- and hypothermia, when
body temperature drops dangerously
low. Get medical help immediately. Warm the person gently and
wrap him in blankets, but don’t rub the hands, arms, or legs, and don’t try to warm the person up with coffee, tea, or alcohol.
These can actually do more harm than good.
·
Animals. Disease-carrying
animals and poisonous snakes may also find themselves homeless. Avoid putting your hands or feet under debris
where an animal may be hiding
and wear boots and long, heavy pants when clearing out debris.
·
THE RETURN OF THE
DISASTER! Listen to radio or TV reports to be alerted if a storm, hurricane, or flood is likely to strike again.
·
Fraud and crime. Disasters
can bring out looters and con artists. Be careful,
keep an eye out for elderly neighbors who may be easily conned. Be wary of people who offer to help if you don’t know them
and they aren’t part of an
identifiable organization, especially if they offer to come into your home. If your house is looted, notify the police immediately. You
may need that police report to file an insurance claim.
·
Keep an eye on children at all times.
Aside from all the dangers listed above, dangerous items in your house, such as cleansers,
medications, or sharp knives, may have
been knocked out of their usual places and could get into children’s hands.
Where to get help
·
Local, national, and government
organizations offer help during emergencies and disasters:
-
The American Red Cross -- contact your
local chapter
-
The Federal Emergency Management Agency
(FEMA) FEMA’s helpline number
is 800-525-0321
-
The Small Business Administration (SBA) -- check for the
number in your local directory
-
The Salvation Army -- check for the
number in your local directory
·
Disaster Recovery Centers may be
established nearby the the area affected by the disaster. You
can meet with representatives of federal, state, local, and volunteer agencies.
·
Local churches, service organizations
(such as the Kiwanis Club, Lions, or Knights of Columbus), large local
employers, and local newspapers and banks may offer help.
Recovering
important records and documents
·
Move quickly to
replace important documents that were lost or destroyed -- your driver’s license,
auto registration, check books, insurance policies, health insurance cards, credit cards, titles to deeds, stocks and bonds, wills,
and other important documents.
·
Make copies and store them away from
your home. Scan the materials and save them on thumb drives. Send a copy of a
thumb drive to a trusted relative or friend who lives at least two hundred
miles from you.
·
Do what you can to
reconstruct lost financial records.
Banks, credit card companies, and
utilities will be able to provide some back statements. The IRS provides federal tax returns, tax preparation
firms usually maintain copies of clients’ recent returns. Information on the
hard drive of a damaged computer may
still be recoverable. Make backups
frequently.
Financial Recovery
·
Document the loss.
-
A digital camera can record hundreds of
picture.
-
A journal should be started to record
all conversations related to the loss and recovery process.
·
Save receipts for
all your expenses.
These will
help both in filing an insurance claim and in claiming losses when you file your income tax return.
·
Make lists, as
soon as possible, of all property that was damaged or destroyed. These
will prove useful for your own purposes, and
essential for filing insurance claims or seeking financial
assistance.
Prepare your inventory before the
event. Include all of your home’s contents. You can check what is damaged or
lost in the fire or hurricane or the collapsed home. This list is one of your
preparation steps that is actually part of your recovery plan.
Include the
following information for each item:
-
Brand name, description, model, year,
ID number
-
The place and the date or year you
bought it, and the price
-
Any documentation such as a sales
slip, canceled check, warranty, or correspondence
with the manufacturer or retailer
-
Description of the damage and what
caused it. For example, a sofa may have been soaked by a flood, or by water
sprayed over it by firemen putting out a fire,
or by water pipes that burst due to a fire.
-
Any photographs that show the item
before and after it was damaged
Do your best to
recall everything that’s missing. Go over photos you have taken inside your home, and ask friends and family if they have
any. Draw floor plans of each
room to help you remember what items were there. You can also jog your memory by walking down the aisles of department stores,
looking through shopping
catalogues, and scanning the classified ads in the newspaper.
·
Let utility
companies know if they should stop billing to your home because it has been destroyed or you can’t live in it.
·
Get in touch with
creditors right away.
Most will be willing to help you get
through this situation,
especially if many people have been affected.
If you are insured
Your homeowner’s
policy will probably cover much of your loss, but keep in mind that policies vary. Your policy may cover these and
other expenses: damage to
your home, including rental units; loss of personal possessions; your living expenses if your house is unlivable due to damage; and rental
payments that you cannot collect due
to damage.
Here are the steps
you will need to take in filing a claim:
·
Contact your
insurance company right away.
If possible, have your policy numbers ready when you call. Find out how they want to process
your claim. They may have special
procedures set up if many people were affected by one disaster. Follow up your
call with a letter, and keep a copy.
·
If your home is
uninhabitable, find out if your insurance company will pay for living expenses.
If so, ask if this will reduce the amount you ultimately receive for damages.
·
Begin salvaging.
Don’t wait for the agent or claims adjuster, but do take
photos. Keep damaged materials as proof of
loss.
·
File your claim.
Do it as quickly as possible, as claims are generally
handled in the order received. File a claim
even if you are not specifically covered for this type of disaster, as you may be covered for secondary
effects, such as the fire and water damage
that often result from an earthquake.
·
Make it easy for
the insurance company personnel to find you and your property. Leave
phone numbers where claims adjusters can
reach you.
·
Work with claims
adjusters. Provide them with your list of damages, and note if the list isn’t complete. Take notes on all conversations with
the adjuster, and write
follow-up letters to the company to confirm what was said. Find out what your neighbors’ adjusters are saying, but keep in mind that your policies may differ.
follow-up letters to the company to confirm what was said. Find out what your neighbors’ adjusters are saying, but keep in mind that your policies may differ.
Remember that
insurance companies makes money by limiting payments on claims. Don’t just take
an offer from an adjuster, it will probably be low to start.
·
Consider bringing
in an independent adjusters
if you are not satisfied with your insurance company’s damage estimates. These measures
may delay settlement and cost you extra
money, but they may be worth it.
·
Settle the claim,
but don’t be in too big a hurry to do so, and don’t accept settlement checks as final. You may need to file
additional claims later, for example,
if your house is looted. Additional
damage may appear later, you may assume that the foundation is not damaged, and
later find out that it has lost its structural integrity.
If you are not
insured
Loans and grants
may be available from FEMA and the Small Business Administration (SBA). FEMA and SBA are the main
organizations that help uninsured
and underinsured homeowners and renters when a federal disaster has been declared. FEMA makes grants and SBA offers loans.
Relief aid is also available from
your local city or county government, private lenders, American Red Cross disaster relief, and other volunteer organizations.
Watch TV or read the newspaper for
announcements of available aid, such as the following:
·
Red Cross
assistance for immediate
repairs and living expenses when no other immediate
assistance is available.
·
Small Business
Administration loans
for rehabilitation of homes and small businesses.
Interest rates are moderate.
·
Commercial and
Federal land bank loans
with moderately low interest rates, for repairs
and improvements.
Unemployment, tax
relief, and legal assistance
·
Unemployment
benefits. If you lose your job due to a disaster and are not
eligible for regular
Unemployment Insurance compensation, you can apply for Disaster Unemployment Assistance. Call 800-462-9029 (TTY/TDD:
800-462-7585) or your local
unemployment office.
·
Legal aid. Low-income
people can receive free legal counseling from local members
of the American Bar Association Young Lawyers Division. Call 312- 988-5522.
·
Tax relief. You
may be eligible for significant tax deductions or refunds. The rules are
complicated, so it’s a good idea to work with a tax adviser or other qualified
professional. But, see “Don’t Rush to
Deduct.”
·
Contact a
knowledgeable income tax professional. You will need assistance with proper reporting of the
loss on a tax return. There will be many opportunities for tax savings. Some
will have very specific time deadlines, specific documentation will be needed.
But, DON’T RUSH TO
DEDUCT. A tax deduction today may have to be reported later as income after an
insurance settlement, that “free” loan from the government may come with a high
price if you got the benefit at a low tax rate and have to repay it at a higher
rate.
Repairing and
rebuilding your home
·
If you have to
leave your home, let the local police know it will be unoccupied. You
may want to secure your home to avoid
vandalism or looting by boarding up the windows.
·
Let others know
where you will be if you have to leave your home. Let your family and friends, insurance
company, mortgage company, employer, post office, delivery services, fire and police departments, utility
companies, and your children’s schools
know where you will be.
·
If it’s safe to go
back in your home, try to collect necessities and important papers -- insurance
information, medication, eyeglasses, hearing aids, and valuables such as credit cards, bank books, cash, and jewelry. You
may want to save important documents
from your computer onto diskettes (if the power is on and it won’t take too long).
·
Salvage what you can.
Professional fire and water damage restoration businesses can help, but check with your insurance company to
see who’ll be paying for these
services. Don’t throw away damaged goods until you’ve made a complete inventory. If you need to get rid of something
that’s dangerous or in the way, make a record of it.
·
Make necessary
immediate repairs.
To prevent further damage, you may need
to patch the roof, board up windows, or
tear down a damaged chimney. The Red Cross
and other volunteer organizations may be able to help you obtain materials or provide volunteers to help with the work.
·
Find a reputable
contractor.
-
Get several
estimates, compare notes
with neighbors
-
Check the
credentials of any
contractors you are considering, is the contractor’s license valid and in good
standing, are there any complaints filed against the contractor?
-
Get contracts in writing
and make sure repairs will be done
according to local building codes. Make sure that there
is a clear statement of work to be completed.
-
Don’t pay more
than $1,000 to any contractor up fromt.
·
Rebuild.
Pay only for performance, periodically as the work progresses. Don’t make your final payment
until the job is done and you are satisfied with it. Don’t sign over an
insurance settlement check to a contractor.
The importance of
maintaining routines
Your will be angry and confused, that
is normal. You will experience great amounts of stress, it is likely that you will
be in psychological shock. You will be forced to make major financial decisions
about assets in which your emotional investment equals or exceeds your
financial investment. Don’t rush, even though you think that you must hurry up
with decisions.
When so much of your everyday life has
been disrupted, it is especially helpful to maintain as much of a normal
routine as possible. This is worth some extra effort,
because maintaining
order and routines helps you deal more effectively with all the work of recovering from a disaster.
·
Make sure your
child gets to school (if it’s open) and keeps up with homework.
·
Have meals
together as a family.
·
Find time to be
spend with family and friends that is not focused on the event or the recovery. Watch
a TV show together, listen to a favorite radio program,
do the daily crossword puzzle, or get together with friends.
·
List important
jobs and chores, get them done, and then check them off your list.
As you return to
familiar routines, you’ll start to feel that life is returning to normal once again.
FAMILY
DRILL AND PRACTICE
CHECKLIST
Here is a checklist to use to drill your
family:
|
POST-EVENT RESPONSE AND RECOVERY CHECKLIST
Substantiation of Loss |
|
|
Call
emergency services as needed. However, lines will be overloaded and wait
times may be excessive for assistance needed.
|
|
|
ASSUME YOU ARE ON YOUR OWN FOR AT LEAST THREE DAYS.
|
|
|
Important steps to take immediately. This list provides a head
start before you discuss your situation with a tax professional.
|
|
|
First, Check
on the health and safety of any persons or pets,
|
|
|
Second,
Secure the impacted area;
|
|
|
If you
are not home or at your office, attempt to contact family and business
associates to verify their physical health and safety
|
|
|
Locate
and test emergency camera.
|
|
|
Take
measures to protect the physical security of any intact assets, If safe to do
so:
|
|
|
Turn
off Gas – IF SAFE TO TURN OFF
|
|
|
Turn
off Water – IF SAFE TO TURN OFF
|
|
|
Turn
off electricity – IF SAFE TO TURN OFF
|
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|
Photograph as
much damaged and undamaged areas as is safe to do.
|
|
|
Take
notes and journal all conversations.
|
|
|
Use
tarps to cover exposed areas
|
|
|
Remove
valuable assets from vulnerable areas, if safe to do so.
|
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|
Then:
Mitigation - Stop or reduce continuing damage.
|
|
|
Call
family and friends in immediate area to check on their well-being and
communicate your own status. Lines may be overloaded or down.
|
|
|
Call
out-of-area friends and family to report status and set up line of
communication. You may have to wait for them to contact you.
|
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|
Locate
emergency supplies. Evaluate the condition and quantities of thee items.
Remove them to a safe place if necessary.
|
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|
Retrieve
important documents
|
|
|
Contact
out-of-area people entrusted with documentation back-ups. Verify condition
and date of back-ups.
|
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|
Start
and maintain a record of all your financial transactions.
|
|
|
Because
of insurance claim and tax benefits that may turn out to be available, you
should keep records of all extra costs that you incur as a result of the
disaster to keep your family safe and secure or your business back to an
operational state. These will fall into three categories:
|
|
|
Include
debris removal, clean-up costs and any expenses that you may incur for
experts who assist you in the process of establishing your loss for tax and
insurance purposes. Depending on the terms of any insurance, some or all of
these costs may be reimbursed.
|
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|
Record
all expenditures related to replacing any items lost, whether they are
personal property (contents) or structure related costs.
|
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Validate
credentials and reference check experts
|
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Make
detail notes in your journal of all conversations. Identify the time point of
all conversations and events. The time sequence may later be important
information.
|
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|
Especially
for events that occur late in the year, contact your tax professional to
determine the time-frames that sensitive tax reporting may be required.
Additionally, certain non-income tax deadlines may be extended due to the
event.
|
|
|
Preserve
All Evidence
of the event. Photograph evidence before and during clean-up. Physical
evidence can be moved if a hazard, but not destroyed.
|
|
Post-Disaster Tax Checklist
Income
Tax reporting may not be high on your priority list right now. Casualty Loss Rules are a particularly
complex part of the Internal Revenue Code.
Here are Tax Tips and a Checklist to consider as soon as possible—before
making major decisions about rebuilding your home, replacing property, and filing
your tax return. This is not a complete list of all the issues and
details you will need to address when reporting your situation on a tax return.
ü 1. Find out whether the event that
damaged or destroyed your property was a Federally Declared Disaster. A federal disaster declaration
is an official ruling that triggers special tax rules.
2. Pictures are worth a thousand
words.
__ Pre-Loss photos of your home
and personal property (contents) are often your best source for documenting important
details of your losses. Ask
friends, family and co-workers to share any pictures they may have from social
events, meetings or holidays gatherings at your home.
__ Post-Loss photos of damaged and destroyed property are
also extremely important. Take lots of “wide-angle” and “detail” photos
before and during clean-up or debris removal. And make sure to take
“before and after” photos of repairs, rebuilding, and/or restoration work.
3. Document, Document, Document.
For property that was damaged or destroyed in the disaster:
a)
Photocopy
or scan paperwork as follows (if
you do not have these documents, contact escrow/title company, contractors,
dealers for duplicate copies):
__
Acquisition Cost of all Real
Property (Purchase Settlement Statement)
__
Additions & Improvements (Invoices
for Labor & Materials)
__
Vehicles (Purchase Contracts)
b)
Regarding
the Personal Property/Contents,
gather [but do not photocopy] and list the Purchase Date, Manufacturer/Make,
Model, Description, Original Cost, Estimated FMV Just Before Disaster, and Cost
to Replace. This list will be also useful
for preparing your insurance claims.
__
Contents by Room for Furniture only; and
__
Other Contents by Type: Clothing,
Electronics, Cameras, Sporting Equipment, Antiques, Jewelry, Artwork, etc.
c)
Insurance policies (homeowners,
vehicle, etc.): Retain the following information (as
received):
__
Your policies, policy declaration pages
__
All documents generated in the
insurance claim process: correspondence, reports, estimates, and insurance
proceeds/checks (including detailed breakdown)
__
Immediately after each conversation
with insurance company personnel, write down details of points discussed.
These
documents should be organized by insurance policy categories: A-Dwelling; B-Other
Structures; C-Contents; D-Additional Living Expenses (“ALE”);
Trees/Shrubs/Landscaping, Items “scheduled” in the insurance policy with
specific coverage amounts; Vehicles and other property.
__ d) Additional
Living Expenses (ALE): list Date, Description, and Cost of temporary
housing, excess auto mileage
(maintain a log of miles driven “post-disaster” to compare to miles driven
“pre-disaster”), utilities,
food (possibly), counseling, medical
& professional fees, moving expenses.
__ e) Recovery
& Repair Expenses: list Date, Description, and Cost of debris removal, clean-up,
temporary and permanent repairs & replacements.
__ f) Post-Disaster Financial Support:
list all
the money you received from FEMA, other government sources, non-profit
organizations, lawsuits, and potential Hazard Mitigation programs.
Post-Disaster Tax
Tips
Tip #1: Consider setting up a
separate checking account for disaster-related expenses.
This
account would be different from a construction account your lender might set up
to dole out insurance funds as repairs/rebuilding progress if you have an
outstanding home loan.
Tip #2: Do Not Rush to Deduct a Loss
on your past or current year’s tax return
before there is a “Closed Transaction”
and a settled outcome.
You
may not have received all the proceeds from insurance, government aid, or legal
settlements. You may not have identified
all of the damage and therefore will not know the true amount of your losses
for a period of time.
Tip #3: Keep an eye on that April
15 deadline.
Although no special “disaster survivor” exception exists
for long-term delay to file your annual tax returns, under some circumstances
the IRS allows 90 to 120-day automatic extensions for filing some tax returns
that are otherwise due near or at the time of a disaster. It
is imperative that you fulfill the normal tax return filing process.
Depending on your personal financial situation, you may elect to “note”
that your gain or loss status is presently unknown.
Tip #4: Professional appraisals
of your home and valuables are very useful.
This
is particularly true if you are underinsured and believe the amounts you will
recover from your insurance will be less than the “cost basis” of your
property. A qualified real estate appraiser can help you prove the pre
and post-loss value of your home and help you make a decision on replacing it
by buying elsewhere versus rebuilding. Appraisals of high value personal
property items “just before” and “just after” the loss are also particularly helpful
if you anticipate insurance shortfalls for those items. Special IRS rules apply to these appraisals.
Tip #5: If a Government agency
issues an “Order to Demolish” your property within 120 days of the
declaration of disaster, that order
will be relevant to your casualty loss computations.
The
additional loss resulting from that order will be treated as if it were part of
the original loss and not a separate event.
Tip #6: The IRS uses a different
method than most insurance companies use
to value a personal property “casualty
loss.”
A list
of damaged property prepared for insurance purposes [3(b) above] is useful to
determine a “casualty loss” for tax purposes, although the values will differ.
Tip #7: Business & Investment
property losses are treated somewhat differently
for tax purposes than Personal Use
property losses.
Special
IRS rules, restrictions, and benefits apply only to Business and
Investment property disaster losses.
Tip #8: Special
IRS Rules regarding Disasters Losses
a)
In
October 2016, IRS rules changed regarding the year in which a loss may be
deducted to give more flexibility to the taxpayer.
b)
Although
insurance proceeds/grants/gifts to reimburse losses of your personal property (related
to a primary residence) are not subject to taxation even if they cause a gain
or potential gain, these proceeds must still be considered in calculating
deductions for losses on your tax return.
© 2011, 2017 John Trapani, CPA,
All rights to reproduce or quote any part of the chapter
in any other publication are reserved by the author. Republication rights
limited by the publisher of the book in which this chapter appears also apply.
JOHN TRAPANI
Certified
Public Accountant
2975
E. Hillcrest Drive #403
Thousand
Oaks, CA 91362
(805)
497-4411 E-mail John@TrapaniCPA.com
Website:
www.TrapaniCPA.com
Blog:
www.AccountantForDisasteRrecovery.com
It
All Adds Up For You
Internal Revenue Service Circular 230 Disclosure
This
is a general discussion of tax law. The application of the law to specific
facts may involve aspects that are not identical to the situations presented in
this material. Relying on this material does not qualify as tax advice for
purpose of mounting a defense of a tax position with the taxing authorities
The
analysis of the tax consequences of any event is based on tax laws in effect at
the time of the event. This material was completed October 2011.
