With Long Island homeowners still feeling the effects of Hurricane Sandy, they are wondering how they will survive financially after losing everything. Elliot Lavietes, CPA, Tax Director, Sanders Thaler Viola & Katz LLP, says those who have yet to receive a check from their insurance companies should file for casualty losses on their tax returns. He also said that, once they get their federal and state tax refunds, they should set aside some money to pay for any extra money they received to cover their losses during the storm.
According to local government officials, Hurricane Sandy severely damaged or destroyed 100,000 homes on Long Island. Mr. Lavietes says he has seen an increase in casualty loss filings this tax season — even greater than when Hurricane Irene hit in 2011. “Usually, when there is a natural disaster, there is a special rule for itemized deductions regarding casualty loss,” he said. “If you are being delayed by the insurance companies and you have yet to file your taxes, please file as soon as possible and claim the casualty loss on your returns.”
If someone files for a casualty loss on their taxes and receive a check from their insurance company in the meantime, Mr. Lavietes says, the insurance money counts as income. He adds that the amount being claimed should not exceed 10% of the claimant’s adjusted gross income. This requirement was waived for those affected by Hurricane Irene but it has yet to be waived for Sandy claimants.
“Once you receive your refunds from the federal government and New York State, do not spend it all at once,” Mr. Lavietes said. “You will need to pay taxes on any additional monies you receive from the insurance company. Keep that in mind when you get your refund checks.”