Note: The President has declared Napa a disaster area due to the September 3, 2000 earthquake making  a variety of federal aid available.

 Check out Napa Valley Register report 9/15/2000. 

The tax law provides for deductions for losses due to natural disasters and other causes.

If you have suffered damage as a result of the earthquake, or other unforeseen incident, you may be entitled to a Casualty Loss Deduction on your income tax return.  Be sure to document your losses as well as you can.  Photographs and/or video tapes can be very helpful.  Documentation to support fair market values before and after the damage as well as the cost or basis of the property is essential.

There are rules for businesses and there are rules for individuals.

(Note: In either case, you could end up with a TAXABLE GAIN if you are reimbursed by insurance and the reimbursement exceeds your "basis".  The law also allows you to postpone a taxable gain if replacement property is obtained.)

For businesses the rules will be more beneficial.  Generally, if you suffer a casualty loss in a business environment, you will deduct the loss as a business expense without limitation.

For individuals the tax rules are not as friendly.  Casualty losses are deductible by individuals as an itemized deduction.  There are two thresholds that must be exceeded before the loss adds to your itemized deductions. 

The first threshold is: The first $100. of your loss is not deductible. 

The second threshold is: After subtracting the $100., the remaining amount of the loss must exceed 10% of your Adjusted Gross Income (AGI).  You can find your AGI at the bottom of page 1 of your tax return.

As a result, many will not receive any tax benefit from their loss.

For more information, you can visit the IRS' web site or you may contact us.