Investing: How to get Catastrophe Tax Deduction
Thanks to Superstorm Sandy, you’ve got cod in your basement, your roof is in your neighbor’s backyard, and your car’s stuck in the mud somewhere in the swamps of Jersey. You lucky person! You might get a tax break. But it’s not a generous one, and it takes a fair amount of work to get it.
The tax code allows you to deduct a catastrophic loss (or theft) from your income. What’s a catastrophe? The IRS defines it as “damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual.”
In most cases, catastrophe is pretty self-evident: storm or fire damage to your home or property. If your house was in Sandy’s path, you probably qualify for a catastrophe deduction. If you live in Arizona and your house burned down because you were juggling flaming batons in the living room, you probably won’t be able to deduct your catastrophe.