NEW CASUALTY SAFE LOSS HARBORS
New casualty safe loss harbors. These were introduced in the Tax Cuts and Jobs Act can have an impact on your taxes. Here’s what you need to know. Some of these are subtle changes from the past, some are larger changes, depending upon the method used. New casualty safe loss harbors should be checked for any changes prior to using them. New casualty safe loss harbors.
The De minimus method–under this method, an individual may estimate the cost of repairs required to restore the individual’s personal use residential real property to the condition that existed immediately prior to the casualty. Similar to the first safe harbor, the costs of any improvements or additions that increase the value of the property beyond its pre-casualty value must be excluded from the estimates,. And, this method is only available for casualty losses of $5,000 or less.
The insurance method–an individual may use the estimated loss detailed in their homeowner’s policy or flood insurance company policy report setting forth the estimated loss sustained as a result of damage to the individual’s personal use residence. This method can be used for any IRS casualty loss, and unlike other methods, does not have a dollar limit.
The contractor method–to use this method, a binding contract must be signed by a contractor and the individual. An individual may use the contract price for repairs specified in a contract prepared by an independent contractor, licensed or registered in accordance with state or local regulations, setting the itemized costs to restore the individuals personal use property to the condition immediately prior to the federally declared disaster area. The costs of any improvements or additions that increase the value of the property beyond its pre-disaster value must be excluded from the contract price. This method does not have a dollar limit.
Disaster loan appraisal method–an individual may use an “appraisal prepared for the purpose of obtaining” a loan of federal funds loan guarantee from the federal government setting forth the estimated loss the individual sustained as a result of damage to the personal property. If you forgot to use one of these methods and ended up with a tax debt, you have three years to amend your tax return. If you are past that time frame, you can always contact a Tax Resolution Services firm for options in the Internal Revenue Code for Tax Debts, including the IRS Fresh Start Program,