As if Tax Day wasn't stressful enough last week, the people in Texas had severe storms and flooding beginning the day before their taxes were due and it was the third time in as many months that Texans experienced natural disasters severe enough to receive FEMA disaster declarations. Of course, Texas is not the only area to have experienced recent large-scale weather-related damage, which seems to be occurring more often, more severe, and wider spread each year.
We, as Americans, are fortunate that our income tax system offers various types of assistance when taxpayers suffer a casualty or disaster and economic loss. Tax breaks like providing special deductions, waiving fees, extending deadlines, and speeding up the processing of tax returns are a few of the tax considerations to keep in mind after a loss. Taking advantage of the assistance will be easier if you have the right documents and supporting documentation in place before disaster happens. Unfortunately, often the very items you need are the ones that are destroyed or misplaced when a disaster strikes, which is why a little planning now can go a long way in the future.
Actually, right now is the perfect time to get prepared since Saturday, April 30 is National PrepareAthon Day, which is part of a FEMA campaign designed to increase emergency preparedness in our communities. Additionally, wildfire season is already underway and hurricane season starts in about 30 days. As far as your tax life goes, two general aspects standout as being critical to recreating your records and identifying items of value so you can take advantage of the tax benefits in case of disaster:
- Documents - Make copies of important documents including driver's licenses, passports, Social Security cards, birth certificates, tax returns, property tax records, titles, deeds, major purchase receipts, and insurance policies, and then put the originals in a fire- and waterproof container. Though physical copies, stored off-site, are sufficient, an electronic copy is better because it will be accessible from any location should you be displaced after a disaster. The best idea is to use an online storage solution or a portable drive and keep the information electronic, which is also easier to update as your household inventory grows, or in these days of minimalist living shrinks.
The tax rules for tax benefits from casualty or disaster are in place to help you. Clearly, they are not the important issue when disaster strikes, but now you know that once the critical issues are managed you can look to the tax system for the help and assistance you are entitled. It is your money, know the rules, use them to your benefit, and keep more of your money.