The Internal Revenue Service has issued guidance providing safe harbor methods for taxpayers looking to determine the amount of their casualty and theft losses, including losses from recent hurricanes and natural disasters.
Revenue Procedure 2018-08 provides safe harbor methods that individual taxpayers can use in determining the amount of their casualty and theft losses for their homes and personal belongings. Four of the safe harbor methods can be used for any qualifying casualty or theft loss; three are specifically applicable only to losses occurring as a result of a federally declared disaster.
For instance, one of the safe harbor methods allows a homeowner to determine the amount of loss, up to $20,000, by obtaining a contractor estimate of repair costs, while another lets a homeowner determine the amount of loss resulting from a federally declared disaster using the repair costs on a signed contract prepared by a licensed contractor.
The aftermath of Hurricane Harvey
Bloomberg
The guidance also provides a table for determining the value of personal belongings damaged, destroyed or stolen as a result of a federally declared disaster.
Revenue Procedure 2018-09 provides a safe harbor method under which individuals may use one or more cost indexes to determine the amount of loss to their homes as a result of Hurricane and Tropical Storm Harvey, Hurricane Irma and Hurricane Maria. The cost indexes provide tables with cost per square foot for Texas, Louisiana, Florida, Georgia, South Carolina, Puerto Rico and the U.S. Virgin Islands.
The safe harbor methods detailed in Rev. Proc. 2018-08 are effective on Dec. 13; the safe harbor method in Rev. Proc. 2018-09 is effective for losses that are attributable to the 2017 hurricanes and that arose in the 2017 disaster area after Aug. 22.
IRS Publication 547 provides more information on casualty and theft losses.
Taxpayers who want to explore claiming these losses by filing an original or amended return for tax year 2016 can see the 2016 Form 4684 and 2016 Instructions for Form 4684.
The 2017 revision of 4684, its instructions and any additional information is expected to be available before the start of the filing season at IRS.gov/Form4684.
To help taxpayers navigate casualty loss issues, the IRS has created a web page, “Tax Law Provisions for Disaster Areas,” with additional information for disaster victims.
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