One year later, a look at the implications of
Hurricane Ian for homeowners
Article Courtesy of The Herald-Tribune
By Budge Huskey
October 25, 2023
Just over two weeks ago we marked the one-year
anniversary of Hurricane Ian and the devastating storm surge that led to
losses for so many, for which recovery and reconstruction continue. In
addition to the significant loss of life, Ianís impact on property was
felt far beyond the southernmost Gulf shores to wind and water damage up
the coast to Sarasota and Manatee counties.
Ranking among the most consequential weather events in this countryís
history, Congress has yet to formally declare it a special natural
disaster qualifying for the highest level of tax relief Ė as if we
required additional evidence of dysfunction in the House of
Representatives and its inability to govern.
Although the full extent of deductibility of established losses in the
future is uncertain, considerable taxable benefits remain available
today to those truly suffering disaster losses who are willing to
navigate the process in their IRS filings.
Natural disasters causing damage losses not declared a special natural
disaster may be claimed as a deduction (only the amount exceeding 10% of
income in the year claimed, less any amount received from insurance
proceeds). Should Congress have acted and removed the 10% rule, the
total value loss would qualify. Itís surprising just how many people
Iíve met who were unaware of this benefit even when having their taxes
prepared by a specialist.
So just how does one establish the decrease in value attributable to
Ian? While some suggest a Realtor may provide an opinion, I would
strongly recommend an expert appraisal from a member of the Appraisal
Institute, or MAI, to be above reproach. Essentially, the appraiser will
establish a market value for the property just before the event and an
estimate of market value following the event (before repairs or
reconstruction) to determine the extent of loss. It would apply to the
building structure as well as any loss of value from secondary
structures, hardscape, and landscaping. The extent of loss then becomes
a deduction against oneís taxable income in the reporting year.
Hereís where it gets interesting: Suppose oneís approved deduction (less
the amount representing 10% of income for the year filed and insurance
proceeds) results in a revised tax obligation for the filing year that
is less than the amount of income taxes paid. In that case, one would
qualify for a direct refund of the amount. And because it is a rebate of
taxes paid, the funds received are not considered income for reporting
purposes. Should the deduction be greater than what may be used in the
filing year based on taxes paid, it would establish a Net Operating Loss
that may be carried back to prior years or carried forward to future
years, whichever is in oneís best interests.
Thereís yet another twist. Ian occurred in 2022, which logically implies
the disaster benefit applies to that year. However, one may elect to
amend his or her return for the preceding year, 2021, in the event
reported income for that year proved lower, thereby affording a more
Filing an amended tax return because of a disaster impact follows the
rules for any amended return, meaning that one generally will have three
years from the original filing date or two years following when the tax
was paid. In the event Ian is declared a special natural disaster, there
may be additional leniency in time periods announced. Of course,
consulting a tax professional is recommended to verify this information.
One year after Hurricane Ian, I have two wishes for the balance of this
year. First, that we be spared another direct hurricane event this
season. And second, that the House of Representatives takes a break from
its kindergarten antics and begins governing once again on matters of
actual importance. You can place your bets on which one is more likely.