Tax breaks available to hurricane victims

For insured victims of Hurricane Dolly, relief could come in the form of a check from an insurance company. For those less fortunate, however, relief is still out there.

Taxpayers, regardless of insurance, can claim disaster-related losses on their tax returns, listing those losses as reductions in income.

"Most personal property losses are taken as a deduction on Schedule A," the U.S. income tax form used by taxpayers to report itemized deductions, said Mark Steber, vice president of tax resources for Jackson Hewitt Tax Service. "Business losses would be handled differently."

Filed as a claim on IRS Form 4684, Steber said the deduction is easily forgotten come tax season. The mistake many people make is waiting until the last minute.

Steber advises homeowners to act is now rather than delaying.

"There is no better time to start taking account of the damage," he said. "It can put money in your pocket."

Documenting the damage and keeping track of payments are just a couple of the tips Steber said could help victims file a tax deduction.

There are additional considerations now that President Bush has declared much of South Texas a major disaster area.

Victims may choose to claim losses on their tax returns for the year the disaster occurred or amend their 2007 tax return to get a refund sooner.

Jackson Hewitt offers a free online disaster relief kit online at jacksonhewitt.com/?DisasterReliefKit. The kit provides a home inventory list to complete, with an explanation of how to claim losses on your tax return.

The kit also answers how to replace lost identification and provides additional links that may prove helpful in a disaster.

"You can't start soon enough," Steber said. "Understand the rules and make sure you know where to get help."

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Assess the damage

It is important to begin assessing your property damage after a disaster. Experts advise that you:

>> Document the damage to your property with photographs or video, including any repairs made to the damage. Keep receipts for the repairs or cleanup work.

>> File a timely insurance claim for reimbursement of the loss. If you do not file an insurance claim, the U.S. Internal Revenue Service may limit your eligible casualty loss to the amount that is not normally covered by your insurance, such as the amount of your insurance deductible.

>> Spend your insurance reimbursement wisely. Usually, if your insurance reimbursement exceeds your basis in damaged, destroyed or lost property and you replace those assets within two years with property that costs at least as much as your reimbursement, the amount of your reimbursement that exceeds your basis will not be taxable. If the president declares the area a disaster area - as he has done for parts of South Texas - you have four years to replace your property if it was damaged or destroyed due to the disaster.

>> Keep track of payments you receive. Payments you receive may be included in or excluded from income, depending on whether restrictions were attached to how you spend the money, or if you received the payments as part of relief provided to individuals in a presidentially declared disaster area.