Some shore residents who normally would be filing their taxes by April 15 could be filing for an extension so they can total and write off the damage caused by Superstorm Sandy.
Tom Donahue of Brigantine, NJ says people have been coming to him with Sandy losses not covered by insurance. He says people need to have significant damage to get a deduction.
“My advice to my clients is to categorize all their losses, they have to come up with both the cost of the item they lost and the fair market value of what they lost,” said Donahue. “They can deduct the value of their losses but the losses have to exceed 10 percent of their income.”
Mark Zinman is in Springfield, Delaware County but has clients who own shore houses. He says for those with insurance coverage, that check is not taxable income.
“It’s considered an involuntary conversion of loss. It’s not income unless you do not spend it,” said Zinman. “You have up to two or three years to spend it. It’s the same if it were a fire or any other loss. The money you received from the insurance company is not taxable.
He says you cannot take the deduction for a vacation home.
Impact on locals
For year-rounders who have big losses not covered by insurance, it can make a big difference, he says.
“I have a client of mine that had insurance, but flood insurance only covers living areas. His garage was the base of his house that that’s what suffered the most of the damage,” said Zinman. “The doors, the interior, everything in the garage, and there’s no coverage for that.”
Zinman says if you haven’t completed your repairs, you can wait and take the deduction on next year’s taxes or file for an extension and complete your return with the final numbers.