Reporting Unreimbursed Property Losses
Where on my 2005 tax return do I enter unreimbursed losses due to Hurricane Wilma?
You can report unreimbursed casualty losses on Schedule A (where you report your itemized deductions) and file form 4684, Casualties and Thefts. For more information about the rules, check out IRS Publication 547, which walks you through the general process of deducting hurricane losses. Also see my column for more information about the rules and links to other helpful IRS publications.
You also will want to check out the rules specifically for victims of last year's three big hurricanes. People who were affected by hurricanes Katrina, Rita and Wilma are subject to special tax rules that let them write off even more of their losses.
You generally have to subtract $100 from your unreimbursed loss and reduce the loss by 10% of your adjusted gross income before you can deduct it. But the $100/10% rule has been waived for victims of those hurricanes. Those people also had the option of deducting their losses on their 2004 or 2005 tax returns (they could file an amended return 1040x for 2004 and get their money back earlier).
Katrina, Rita and Wilma victims also are subject to special tax rules for accessing money in their IRAs, 401(k)s and certain other retirement accounts. They'll be able to take up to $100,000 in qualified hurricane distributions without an early-withdrawal penalty and can spread their tax bill over three years (or avoid the tax if they put the money back into the account within three years).
If you've been affected by those hurricanes, you should check out IRS Publication 4492, which talks specifically about the tax rules for victims of hurricanes Katrina, Rita and Wilma. CCH, which publishes tax information, also has a helpful tax briefing explaining the special tax rules. Also check out the IRS's Help for Hurricane Victims resource list. And see Special Break for Gulf Coast Students for more information about the extra Hope and Lifetime Learning credits for students who attend colleges in the areas hit by Hurricane Katrina.
For more information about dealing with hurricane losses and your homeowners insurance -- which can help you prepare for next year's hurricane season -- see Insurance Lessons After Katrina and Calm After the Storm.
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