Life is full of ups and downs, and there is no way of predicting when you will suddenly find yourself in a bad situation. However, there is at least one up side to disaster; most can be counted as casualty losses or deductions on your taxes. While you wont get all the money back you lost, for major losses, it is worth claiming the deduction.

Money doesnt replace everything that has been lost in a disaster, but it can help you rebuild. There are certain requirements defined by the IRS that must be met for your loss to be claimed as a deduction. The IRS considers a casualty loss to be the damage, destruction or loss of property resulting from a sudden, unexpected or unusual event. Losses are not limited to those caused by natural disasters, there are also certain circumstances such as robbery or theft that are considered casualty losses. Other examples of what the IRS considers a claimable casualty loss are: floods, hurricanes, tornadoes, fires, earthquakes, ice storms, blizzards, vandalism, drought, and mudslides. Natural causes for loss are not considered claimable. Such things as lost property, termite damage or damage caused by neglect will not be accepted.

If you are able to claim a casualty loss you will want to fill out Form 4684 and Schedule A to itemize your deduction. These two forms should be attached to your individual income tax return. No other evidence of your losses is required, but you will need documents that show your expenses and losses if the IRS audits you. It is important to understand that a deduction doesnt become a part of your refund. For example if your casualty deduction is $3,000 this amount will subtracted from your taxable income. This makes the amount you owe in taxes much smaller, and may result in a higher refund, but this does not always happen.

For certain situations the casualty loss deduction is given without following all of the rules. For example if someone experienced loss in a Presidential declared disaster area, the victims can claim losses in the same year as the disaster. For all other people the deduction must be claimed the following year.

The IRS sets certain limits with casualty loss deductions. The loss amount must be reduced by one hundred dollars. After this reduction, the loss amount must be more than ten percent of your adjusted gross income. The loss amount is then also reduced by the ten percent amount of your adjusted gross income. It is also required that any insurance money that was received for the loss be subtracted from the loss amount.

Chris Simons is a prolific freelance writer. You are welcomed to visit http://tax.theconsumerguide.net, for more information on Tax Preparation.

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