Filing taxes if your home was damaged during Hurricane Sandy can be overwhelming, so NY1's Money Matters takes a look at how Sandy victims can deduct their losses up. NY1's Tara Lynn Wagner filed the following report.
Certified public accountant Andrea Parness has been working out of her dining room since her Belle Harbor basement office was flooded during Hurricane Sandy. Many of her clients and neighbors also suffered enormous losses.
"Every boiler and hot water system and electrical system that is in the basement is gone, because it touched salt water. Done," Parness says.
Those losses can lead to a substantial tax break.
"The individual can deduct from their income on the itemized deduction schedule a certain amount of what they lost," says Dianne Besunder, an IRS spokeswoman.
However, Parness says no one is excited about it.
"People are not walking into their accountant's office and saying, 'I got hit by Hurricane Sandy and I understand I'm going to have a tax benefit!'", she says. "They're upset. They're stressed."
They are also facing the complicated multi-step process of determining exactly what their loss is, a process they need to repeat for every single damaged item.
"You really have to see what was damaged, what your cost of that item was when you bought it, what the fair market value was the day before, what the fair market value was after," Parness says.
That's just the beginning. From that figure, victims deduct any insurance reimbursements and, in some cases, FEMA money you may have received.
"Then, based on the law, you deduct $100 and then 10 percent of your adjusted gross income," Besunder says.
For a couple making $200,000 a year, that's a $20,000 adjustment.
Victims of other natural disasters, such as Hurricane Katrina, saw that 10 percent reduction waived. So far, that tax break has not been extended to victims of Hurricane Sandy.
Parness argues that it should, since in this example, allowing the victims to include that other $20,000 could save them an additional $5,000 to $8,000 in taxes.
"That can buy a new boiler. That can help pay to put back an electrical system," Parness says. "Is that going to make that person whole? No. Is it going to help? Yes."
The IRS has posted a YouTube video to help Hurricane Sandy victims navigate the process, as well as a workbook that can help victims calculate their losses. Both are available at irs.gov.