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How to Deduct Hurricane Losses

Can families deduct hurricane losses that are not covered by any type of insurance on their federal income-tax returns? After living through three hurricanes and one tropical storm this year, a lot of people in Florida are facing problems we never thought of before.

Not only can you deduct unreimbursed losses resulting from the storms, you even get a choice of writing them off on your 2004 income-tax return or taking a retroactive deduction on your 2003 return. You get this generous opportunity because your loss occurred in a presidentially declared disaster area. Amending your 2003 return would guarantee you a refund check from the IRS.

Losses due to hurricanes are considered casualty losses, and to figure your deduction you must first reduce each loss by $100 and then subtract 10% of your adjusted gross income. (Those residents who suffered from two storms must reduce their loss by $200.) You can deduct the remainder.

If your loss is $35,000 from one storm, say, and your AGI for 2003 was $75,000, your loss would be $27,400. Because of the AGI reduction you'll probably want to claim the write-off in the year in which your income is lower. If you decide to amend your 2003 return, be sure to write "Florida Hurricanes" at the top of Form 1040X so that the IRS will expedite your claim.

For more information about special tax rules for people hit by the hurricanes, see the IRS's Disaster Area Tax Relief page.