Under the Disaster Tax Relief Act of 2017, there are special rules for qualified disaster-related personal casualty losses that occurred in the designated disaster areas of Hurricane Harvey, Irma or Maria. This provision impacts taxpayers that reside in Florida, Georgia and Texas, and may also impact certain residents of Louisiana, South Carolina and Puerto Rico. In subsequent legislation, the 2017 California Wildfires and federally declared disasters in 2016 were also included in this special treatment for casualty loss. This special provision does not apply to any other federally declared disaster that occurred in 2017.
Unlike non-disaster related personal casualty losses (which are entered as an itemized deduction subject to a $100 deductible and reduced by a 10% AGI limitation), these hurricane qualified disaster-related personal casualty losses under the Disaster Tax Relief Act receive special treatment. Specifically, the 10% AGI limitation requirement has been eliminated but the $100 per-casualty floor for these hurricane-related casualty losses was increased to $500. However, taxpayers are not required to itemize to claim these qualified disaster-related personal casualty losses caused by the hurricanes and can add the qualified disaster-related casualty losses to their standard deduction.
These qualified disaster-related personal casualty losses can be claimed on the 2017 tax return or a taxpayer can elect to carry back the qualified disaster-related personal casualty loss to their 2016 tax return. The election to carry back the casualty loss had to made by October 15, 2018.
This election must be made by either filing your 2016 tax return and claiming the qualified disaster-related personal casualty losses or by amending a previously filed 2016 tax return.
To elect carrying back the qualified disaster-related personal casualty loss to 2016 from the Main Menu of the 2016 Tax Return, (Form 1040) select:
- Personal Information
- Other Categories
- Disaster Designation
- Double-click on the appropriate designation of Hurricane Harvey, Hurricane Irma or Hurricane Maria.
Once a Hurricane disaster designation has been selected, the special provision for qualified disaster-related personal casualty losses menu will be become available to the user. If you are amending the 2016 tax return, remember to follow the procedures for amending a tax return and pull the original column into the Form 1040X (and any state return if necessary) before proceeding to calculate the qualified disaster-related personal casualty loss. To access the Amended Return (Form 1040X), go to the Miscellaneous Forms Menu. Also see the Knowledgebase Article, Amending An Individual Tax Return.
To calculate the qualified disaster-related personal casualty losses, from the Main Menu of the Tax Return, (Form 1040):
- Itemized Deductions
- Casualty/Theft Loss (4684)
- Section A – Personal Property and select NEW and enter each item on the menu.
This qualified disaster related personal casualty loss will then be entered on line 28 of Schedule A and not on Line 20. If the appropriate standard deduction amount is more favorable to the taxpayer than their itemized deductions (without inclusion of the qualified disaster-related casualty loss), that standard deduction amount will also be entered on Schedule A, Line 28. The program will then generate a Schedule A that reflects the “Standard Deduction with Hurricane Loss”, when appropriate.
If you are amending a previously filed 2016 tax return, you will need to pull this calculation into the Form 1040X by pulling the corrected column. Also include in the Explanation for the amended return a notation that it contains a qualified disaster-related casualty loss, and include a copy of the Form 4684 and a copy of the appropriate Schedule A with the Form 1040X.
NOTE: This is a guide on entering the special rules for qualified disaster-related personal casualty losses in the 2016 federal income tax return into the TaxSlayer Pro program. This is not intended as tax advice.