Note: This is a guest blog written by Richard M. Cieri, a Certified Public Accountant in New Jersey and New York. He received his Bachelor of Science degree in accounting from Boston College and a Masters in Business Administration in Taxation and Management from New York University Graduate School of Business. Mr. Cieri is a partner in Burton, Cieri, Del Sordi & Co., LLC.

So, you have filed for your FEMA and insurance claims and have received all the proceeds you believe you are entitled to. Well, the federal tax laws give you one more bite at the apple, "the casualty loss deduction." This is a deduction that your tax advisor or preparer should be aware of. The deduction has many limitations and you must offset your total loss by what insurance proceeds you receive. However, if your loss is large enough beyond what you received then this deduction may be another source of relief. Here is how it works:

If you have significant storm damage from flood or wind, these costs, repair, and/or replacement can be a deductible as an itemized deduction on Schedule A of your 1040 individual tax return. The damage must be caused by an unexpected or unusual event. As I stipulated before, you only get a deductible loss for the excess amount over what was collected from insurance proceeds—if the loss is fully covered, then no deduction. You are also limited in what you can deduct by a federal limitation that the loss must exceed 10% of your adjusted gross income. Plus, to add insult to injury, a $100 fee. Here is an example:

Bob's house was flooded and he suffers $50,000 worth of damage to his home. Bob's adjusted gross income is $80,000 and he recovered $25,000 from insurance:

Click here to view the table.

The calculation of what the actual loss is becomes the first item that needs to be examined and should be done with a tax professional as it involves fair market value of the property before and after the casualty, appraisals are preferred. In addition, the casualty loss usually must be taken in the year it occurred. However, a casualty loss from a federally declared disaster area can be reported on the prior year's tax return by amending that year's tax return. These deductions are a hot item for the IRS and you must have meticulous records documenting the event and costs, such as each item you owned and that you are claiming as a loss. Government publication 547 can be helpful in detailing and organizing what needs to be done. If I can be of help to anymore, please contact me at 973-744-4332 ext. 15.

Richard M. Cieri, C.P.A., NJ & NY