Casualty and Loss Deductions

[yekcim123]

What is the name of your state? Louisiana

We were living in New Orleans last year during the Hurricane and when we filed our taxes we listed our losses. The total amount of our losses from the hurricane minus our insurance reimbursements was $57,329. The total amount of all of our deductions including our mortgage payaments, medical, etc. was $65,377.00. Our Adjusted Gross Income was $28,593.00.

This year our Adjusted Gross Income is Approx. $38,536.00. Our deductions so far are our medical at Approx. $4000.00 and Mortgage Interest at $5760.00.

My question is that I was told by someone at Jackson Hewitt last year that the Casualty and Loss Deduction rolls over every year that you file taxes until that amount is exauhsted. I would like to know if that is true and if so, how much of that amount can I claim on this years taxes as a deduction.

Thanks.

[abezon]

Casualty losses don't carry forward, but a net operating loss created by a casualty loss *may* carryforward or back 2 years. See Pub 536 for info. [url]http://www.irs.gov/pub/irs-pdf/p536.pdf[/url]

NOLs are very technical, so use a pro. Make sure you get at least an enrolled agent. You'll need a copy of your last 3 years' returns. If you don't have them, the IRS can give you transcripts.

[tranquility]

Generally, the loss must be taken in the year it was sustained. If it is a disaster loss in an area determined by the President to warrant federal asistance (New Orleans would apply), Code Sec. 165(i) allows you to deduct the loss in the year it occurred or to elect to deduct the loss in the preceding tax year. I don't believe Katrina losses are not subject to the usual floor on disaster losses.

However, a casualty loss can result in a net operating loss. If there is an excess of allowable deductions over gross income (with adjustments) you can generate an NOL and deduct those amounts appropriately.

So, I agree with the effect of what your guy said, but not the description.

I don't disagree with Abezon except to add you can elect to relinquish carrying back the NOL so you can take it forward.