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Flood Damage, Tax Returns, and Homeowners Insurance

by Matthew Person on August 7, 2017

Flood Damage, Tax Returns, and Homeowners Insurance: What you Need to Know

The last thing on people’s mind following extreme adverse weather is their tax returns – filing taxes can be confusing enough, but accounting for storm damage and dealing with homeowners insurance can truly create a headache.

Estimating Lost Property Value

The biggest issue for people who suffered property loss is determining how much the value of their home declined and how much property damage they sustained. This must ultimately be determined by a property appraiser, but one of the best ways to estimate value lost is by how much it cost to clean, repair, and renovate the building.

Homeowners Insurance

Not every type of damage is covered by homeowners Insurance – This will also vary with each individual plan. Something like a leaky water heater which caused damage over many months would not be covered due to negligence of proper maintenance.

Other types of perils that may not be covered, unless you add them to a standard home policy are mold and sewer backups which can be the source of very expensive repairs.

Here is a list of insured/uninsured items from https://www.fema.gov/

What is insured under Building Property coverage:

  • The insured building and its foundation.
  • The electrical and plumbing systems.
  • Central air-conditioning equipment, furnaces, and water heaters.
  • Refrigerators, cooking stoves, and built-in appliances such as dishwashers.
  • Permanently installed carpeting over an unfinished floor.
  • Permanently installed paneling, wallboard, bookcases, and cabinets.
  • Window blinds.
  • Detached garages (up to 10 percent of Building Property coverage); detached buildings
    (other than garages) require a separate Building Property policy.
  • Debris removal.

What is insured under Personal Property coverage:

  • Personal belongings such as clothing, furniture, and electronic equipment.
  • Curtains.
  • Portable and window air conditioners.
  • Portable microwave ovens and portable dishwashers.
  • Carpets not included in building coverage (see above).
  • Clothes washers and dryers.
  • Food freezers and the food in them.
  • Certain valuable items such as original artwork and furs (up to $2,500).

What is not insured under either Building Property or Personal Property coverage:

  • Damage caused by moisture, mildew, or mold that could have been avoided by the property owner.
  • Currency, precious metals, and valuable papers such as stock certificates.
  • Property and belongings outside of a building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools.
  • Living expenses such as temporary housing.
  • Financial losses caused by business interruption or loss of use of insured property.
  • Most self-propelled vehicles such as cars, including their parts (see Section IV.5 in your policy).

Flood Damage and Tax Deductions

Any insurance payment the homeowner receives for damage to their property must to be deducted from the repair costs. Additionally On state tax returns people who lost furniture, electronics, linens, clothing and other home furnishings in the flood can claim a refund of the state sales tax they paid on the item,

This does not apply to automobiles and immovable items, such as major appliances, water heaters and wall-to-wall carpet. The age of an item, however is not relevant when making claims – An antique dresser bought 20 years ago could still be claimed.

For more information on storm damage and tax filing, or to schedule an appointment to review your taxes contact Person Huff CPA Today!

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