Tax Concerns for Homeowners After Natural Disasters
Thursday, September 28, 2017, 6:00 AM | Leave Comment
The end of summer 2017 is not looking good. If you turn on the news, you will likely see coverage of natural disasters, such as floods in Texas, hurricanes building in the Caribbean, and wildfires raging across the western United States.
Hopefully, your primary reaction is a humanitarian one. After that, your thoughts may wander to an instinctual one, such as how to protect yourself and your home from natural disasters.
You may not immediately link natural disasters to IRS practice and procedure, but perhaps you should. Taxes could throw you that extra lifeline you need to get back on your feet.
Here are three ways they could help you if you find yourself a victim of a natural disaster.
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Tax Deductible Expenses
Usually, damages and repairs to property are not eligible for tax deductions. The IRS counts property casualties as the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual.
Additionally, the IRS recommends that taxpayers prepare for hurricanes, floods, and other natural disasters. If you are taking preventative measures, take the time to make electronic copies of your important documents. This way, you can organize them and have them readily at hand, as well as have a copy of them that cannot be physically damaged.
While you cannot deduct damages from natural wear on your home, the costs of bringing your home back to its fair market value can be eligible for tax deductions. When dealing with the aftermath of a natural disaster, you will need thorough evidence, such as photos and videos of the damage, damage repair, and receipts to claim them on your taxes.
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Tax Deadline Extensions
Tax rule extensions can apply after the president has declared a state of emergency in the wake of a natural disaster. This can allow victims of natural disasters to postpone dealing with their taxes for up to a year.
Victims also have options for filing property losses. They can either file losses for the previous tax deadline or for the upcoming one. If you have already filed your taxes at the time of a natural disaster, you can apply to add the damage to them.
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Tax Lien Transfers
Perhaps the last place you would think to look for natural disaster relief is in a tax lien. Typically, you want to avoid the government claiming ownership of your property and damaging your credit at all costs. While this doesn’t necessarily change after a natural disaster, there are situations where a property tax lien transfer or sale might protect you as a homeowner.
In this scenario, when the homeowner cannot pay their property tax, they can sell the lien to a third party so that the government no longer has the claim to ownership of their property. The third party pays the debts on behalf of the homeowner and they set up a payment plan. A tax lien transfer could help you avoid foreclosure, penalties, and help you repair your credit. While a tax lien is never an ideal solution, it can be a useful last resort.
You never know what kinds of costs and income losses you may be dealing with in the face of a natural disaster, and even if you’ve prepared for one, you can still be caught off guard. Make sure to know what kinds of natural disasters your area of residence is prone to and research all the defenses available to you in case you become a victim to one.
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