Claiming Casualty & Theft Losses on Return
Mar 12, 2023
Natural disasters, thefts, and other unexpected events can cause significant financial losses for individuals and businesses. Fortunately, the IRS has provided some relief through tax deductions for designated damages. However, there are specific criteria that must be met in order to claim these deductions along with specifications for reporting them on your return. Here are some of the most common questions and answers to claiming casualty & theft losses on your return.
How do I know if my loss qualifies?
You can only deduct casualty and theft losses if they’re directly the result of an event that’s a federally declared disaster. Meaning, the President of the United States has officially declared the event a disaster. Federal disasters are often declared for areas heavily impacted by hurricanes, tornadoes, or floods. To view all federally declared disasters and related information, visit the IRS website.
There are 3 types of deductible losses allowed under the umbrella of federally declared disasters:
1. Federal casualty loss: The loss of personal use property due to a federally declared disaster. The loss must have occurred in the state receiving the disaster declaration.
2. Disaster loss: The loss of personal use or business property resulting from a federally declared disaster that occurred in a county eligible for public or individual assistance, or both.
3. Qualified disaster loss: The loss of personal use property due to a disaster declared under Section 401 of the Stafford Act, or several specific natural disasters or time periods.
Do theft losses qualify for deductions?
The IRS defines theft as the act of taking or removing property with the intention of depriving the owner of it. The act must also be illegal under state law. But as with the case of a casualty claim, the theft must have occurred due to a presidential disaster area declaration. For example, your city is struck by a tornado and the President declares it a disaster area. Subsequently, a thief accesses your home through a window broken by the storm and steals your car. One could argue the loss of the car was from theft due to a disaster.
Can I deduct a loss covered by insurance?
No, you cannot deduct casualty and theft losses covered by insurance, unless you file a timely claim for reimbursement and you reduce the loss by the amount of any reimbursement or expected reimbursement. For more information, please review IRS Publication 547.
How do I calculate my loss?
Personal casualty and theft losses attributable to a federally declared disaster are subject to the $100 per casualty and 10% of your adjusted gross income (AGI) limitations unless they are attributable to a qualified disaster loss. Personal casualty and theft losses attributable to a qualified disaster loss are not subject to the 10% of the AGI limit and the $100 limit is increased to $500. An exception to the rule above, limiting the personal casualty and theft loss deduction to losses attributable to a federally declared disaster, applies if you have personal casualty gains for the tax year.
What form do I use to claim this deduction?
Casualty and theft losses are first reported and calculated on Form 4684. You will then report them on Form 1040, Schedule A.
Can I itemize this deduction?
For tax years 2018 through 2025, you can no longer claim casualty and theft losses on personal property as itemized deductions, unless your claim is caused by a federally declared disaster.
For tax years 2018 through 2025, personal casualty and theft losses may be deductible when: they are attributable to a federal disaster. For tax years beginning before 2018 and after 2025 personal casualty and theft losses may be deductible even if they are not attributable to a federal disaster.
In conclusion, claiming casualty and theft losses on your tax return can provide some relief for individuals and businesses that have suffered unexpected financial losses. It’s important to remember that only losses directly resulting from federally declared disasters are eligible for deduction. As with any tax-related issue, it’s always best to consult with your WVC tax professional to ensure that you are following the appropriate guidelines and maximizing your deductions.
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Categories: Tax Planning
Best Practices for Scanning Tax Documents With A Mobile Device
Mar 02, 2023
Every year, tax season requires clients to share large amounts of data – mostly in the form of paper documents. As technology has evolved, so have the ways in which we share and collect personal files. The use of electronic document exchange software has become the standard for most accounting firms as it is quick and easy.
While most people don’t have a personal document scanner, almost everyone has a mobile device. This year we wanted to share best practices for scanning your tax documents so they are legible and compatible with our tax preparation software.
Image Files (.jpg, .png, .tiff, etc.) are not the best option
Many times, we receive documents as pictures or images which have been taken utilizing the camera app on your mobile device or tablet. Typically, photo/image file types utilize compression to reduce the size of the file for ease of upload. However, this compression results in a loss of quality, which ultimately makes the file harder to read. Instead, you can use your same mobile device or tablet to scan and submit documents in a PDF format! See below for tips!
Why are PDF files optimum?
When you create a PDF file containing data such as paragraphs, images, numbers, graphs, tables, etc., it will always display that data in the exact same way no matter where you are viewing it. PDF files also have universal compatibility meaning most modern browsers are fully capable of opening and displaying PDF files, and most modern operating systems come with basic pre-installed apps to open PDFs with ease.
Tips for creating PDF files
We have provided some resources below for your convenience. You can also do an internet search for your exact phone model for additional scanning options as well as where to find support for scanning from a mobile device.
- Article: Scan Documents with your phone: iPhone and Android
- iPhone specific – Video: Scanning using the Files App
- Android specific – Video: Scanning using Google Drive App
- Adobe Scan
Finally, as you’re working to prepare your tax records for the current filing season, take the time to connect with your tax professional to avoid any surprises and to ensure you have all the necessary documents to meet your filing deadlines. We do not require our clients to send documents electronically, you can still provide your files to us directly in paper form. We will provide you with your original documents when we complete your tax return but we always encourage you to make a copy of your files for safekeeping.
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Categories: Tax Planning
Deadline Extended For ApprenticeOhio Training Grants Until The End Of March
Jan 17, 2023
In September of last year, Ohio Governor, Mike DeWine, announced training reimbursement grants being made available to ApprenticeOhio sponsors and employers as a result of a federal Building State Capacity to Expand Apprenticeship through Innovation grant that Ohio Department of Job and Family Services (ODJFS) received in 2020.
Sponsors and employers can apply for the grants at Apprentice.Ohio.gov, receiving reimbursement of up to $2,500 per apprentice for up to 10 apprentices to help cover the costs of training and tool allowances.
The applications for reimbursement of costs incurred since July 1, 2022, were originally due by Dec. 31, 2022, but the deadline has been extended until March 31, 2023. According to ODJFS Director, Matt Damschroder, “the program has received 100 applications so far and approved nearly half of them, paying out nearly $900,000.”
To learn more and to apply, visit https://apprentice.ohio.gov/
Categories: Construction & Real Estate, Manufacturing & Distribution, Tax Planning
Ohio Tax Update: State Offers Dollar-for-Dollar Tax Credit for Scholarship Fund Donations
Dec 14, 2022
Starting with the 2021 tax year, the state of Ohio began offering dollar-for-dollar tax credits to individuals who donate to an Ohio-certified scholarship granting organization, or SGO. Defined by the state, SGOs are organizations exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code, that prioritize awarding academic scholarships for low-income students to attend primary and secondary schools (K-12), and that receive certification from the Office of the Ohio Attorney General.
Individuals that donate to an SGO can expect to receive a tax credit equal to 100 percent of their contribution (up to $750,) while married couples could receive up to a $1,500 credit. In addition to claiming the state tax credit, eligible charitable contributions can also be claimed on federal income tax returns if the taxpayer opts to itemize their deductions.
Currently, there are 25 certified SGOs in the state of Ohio, all of which are listed on the Ohio Attorney General’s website.
“This is a very easy credit for Ohio taxpayers to take advantage of,” says William Vaughan Company Tax Partner, Sandi Towns. “Those who have donated to Ohio-certified SGOs in 2022 need simply include their proof of donation letter(s) with other tax documents given to their accountants.”
Says Towns, “William Vaughan Company’s tax team will continue to monitor this and other tax credit updates, however I urge anyone wishing to take advantage of these credits to contact their accountant in order to determine which credits make the most sense for their specific tax and financial situation.”
Sandi Towns, CPA/PFS, CFP®
Tax Partner
sandi.towns@wvco.com
Categories: Tax Planning
Inflation Reduction Act Expands 179D (Energy Efficient Commercial Buildings Deduction)
Oct 17, 2022
The Inflation Reduction Act of 2022 (2022 IRA) was passed to incentivize investment in clean energy and promote the reduction of carbon emissions. A large share of the incentives come in the form of tax credits, which in some cases are extensions or expansions of current credits, such as those for electric vehicles or residential energy upgrades.
Of the tax provisions introduced by the 2022 IRA, one of the most significant to businesses has been the expansion of the Energy Efficient Commercial Buildings Deduction (§179D), which increases the maximum deduction and updates the eligibility requirements for a property’s reduction of energy costs, in addition to other changes.
Under the expanded provision, a deduction is allowed for all or part of the cost of certain energy-savings improvements made to domestic, commercial buildings placed in service as part of the building’s:
- interior lighting systems
- heating, cooling, ventilation (HVAC), and hot water systems
- building envelope
The tax deduction benefits both commercial building owners and lessees along with designers of government-owned buildings. Additionally, the provision states that installation of energy-efficient property may occur as a result of new construction, or through the improvement of an existing commercial or government building.
Efficiency standard: To qualify for the deduction, newly updated eligibility requirements call for energy-efficient property to reduce associated energy costs by 25% or more (decreased from 50% or more) in comparison to a reference building that meets the latest efficiency standards.
Applicable amount: The applicable dollar value of the deduction is $0.50 per square foot, an increase of $0.02 for each percentage point above 25% that a building’s total annual energy cost savings are increased. However the amount cannot be greater than $1/ square foot, and the maximum amount of the deduction in any tax year cannot exceed $1/ square foot minus the total deductions taken over the previous three years (or during a four-year period in cases where the deduction is allowable for someone other than the taxpayer). The applicable dollar value will be adjusted for inflation for tax years beginning after 2022.
An increased dollar value is available for projects that satisfy prevailing wage and apprenticeship requirements for the duration of the construction.
Alternative deduction for energy-efficient retrofit property. Under the 2022 Inflation Act, taxpayers may elect to take an alternative deduction for a qualified retrofit of any eligible property. However, instead of a reduction in total annual energy power costs, the deduction is based on the reduction of energy usage intensity.
For more information on how you may be able to take advantage of this deduction or any other tax relief provisions under the 2022 Inflation Act, contact William Vaughan Company’s team of trusted tax professionals.
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Categories: Tax Planning