Dear Friends of Our Firm,
The highly publicized “bailout law” passed last year—the Emergency Economic Stabilization Act of 2008—extended several tax breaks that had officially gone off the books. But other new law changes have flown under the radar.
In particular, you might not be aware of modifications in the rules for casualty and theft losses. Significantly, the new law provides a unique tax break for disaster-area victims, but reduces deductions for other personal and casualty theft losses.
Here is some background information: An individual may deduct personal casualty and theft losses only to the extent the annual total exceeds 10% of his or her AGI after subtracting a $100 floor per event. In contrast, there’s no10%-of-AGI limit or $100 floor for losses sustained by a business.
The same rules generally apply to losses suffered in disaster areas like counties hit hard by hurricanes or wild fires. But victims in these areas may be eligible for fast tax relief.
Under the new law, the definition of a federal “disaster area” has been tweaked to be consistent throughout the tax code. In addition, for tax years beginning after 2007 and before 2012, the 10%-of-AGI limit is disregarded for qualified disaster-area losses. On the other hand, the $100 floor for each casualty and theft loss—whether or not it occurs in a disaster area—is temporarily increased to $500 for 2009 only.
Finally, the new law also allows nonitemizers to deduct personal casualty losses in disaster areas, in addition to claiming the standard deduction.
If you are affected by the new rules for casualty and theft losses in 2009, contact our office at (618) 542-9127. One of our expert staff members will be able to provide the necessary assistance.
P.S. You may have other questions regarding casualty and theft losses on your 2008 return. Call (618) 542-9127 to arrange a personal consultation.
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