Every year, filing taxes can create stress. For many impacted by the floods, this year that stress has likely doubled as they work to figure out how losing their home and belongings plays a role in this tax season.
“We take a look at what did we lose, how much is that valued after the fact, and are you reimbursed for any money such as FEMA, insurance, any type of donation goods. Those are taken in to consideration to determine your loss, and that loss can be carried over as a deduction on your tax return,” says tax advisor Montgomery Johnson.
In order to make the evaluation, Johnson says people impacted by the floods must do their best to reconstruct what they had before the flood, what they lost in it, and what was donated to them. If that poses a challenge, there is help available through the IRS. Johnson adds, “It’s publication 584 and it’s a wonderful workbook that itemizes your life and your surroundings. Each page is filled with items you would find in a household.” The filled out pages of the workbook can be taken in when you file your taxes to help give the best estimate on your losses in 2016.
Johnson says it’s most important to be mindful of how you’re filing your taxes this year. He says often times help from organizations like FEMA or Samaritans Purse is not taxable, but there are a few exceptions. “None of that money will end up being taxed because of the federal disaster but if it’s applied directly towards replacement, that is reducing your loss,” Johnson explains. In that case, the money may be taxable.