SEVEN NEW CASUALTY LOSS SAFE HARBORS
Seven new casualty loss safe harbors. The Tax Cuts and Jobs Act limits the deduction for personal casualty losses to those located in a federally declared disaster area. Special provisions have been included which waives the 10% of AGI, or Adjusted Gross Income threshold and increases the $100 deductible to $500. The new regulations also allow for the casualty loss to be added to the standard deduction if the taxpayer does not itemize. Seven new casualty loss safe harbors.
Revenue Procedure 2018-08 provides for seven “safe harbor” methods to reduce the burden on taxpayers when determining their casualty loss deduction and to avoid IRS audits in the future. Seven new casualty loss safe harbors. To qualify for the safe harbors, a personal use residence is defined as real property, including improvements, that is owned by the individual who suffered the casualty loss and contains at least one personal residence. A personal residence will not qualify if any part of the property is used as a rental or contains a home office used in a trade or business. Furthermore, it must be a single family residence, this does not include condominiums or cooperative units. It also does not include a mobile home or trailer. If you don’t go by these rules and end up with back taxes, call a good, long standing, and reputable Tax Resolution firm, for information on the IRS Fresh Start Program. This would be better than Collection Action, like a IRS Wage Garnishment.
If an individual owns two or more personal use residences, they may use the same or different safe harbors for each residence. The estimated cost method uses the lesser of two repair estimates by licensed contractors. De minimis method allows an estimate of the cost of repairs to restore the residence to pre-casualty condition. The insurance method uses the loss detailed in the insurance policy, and does not have a dollar limit. The contractor method can only be used if the homeowner signs a binding contract with a licensed contractor. The contract price for the repairs can then be used. Disaster area loan appraisal method, uses the disaster loan, which is used for applying for federal funds for paying for the damages. This method does not have a dollar limit for its use.