Top Stories Montgomery

Taxpayers have already mailed their 2010 federal income tax forms, but it is not too late for tornado victims to claim a deduction for property losses for that tax year — even though the disaster occurred in 2011.

And a new bill in Congress could increase the size of that deduction significantly.

Currently, the law allows qualified disaster victims to claim a deduction for damage incurred in a declared disaster, such as the April 27 tornado outbreak — and it gives taxpayers a choice between filing in the current year or for the previous year.

Returns already sent can be amended to declare the deduction.

“The ability to file the return for the prior year is a relief provision because you may need it now instead of a year from now,” said tax attorney Leigh Griffith in the Nashville office of the firm Waller, Lansden, which has a Birmingham office.

Disaster victims cannot claim a deduction for damage already covered by insurance or grant money from the Federal Emergency Management Agency.

A bill introduced last week by U.S. Sen. Richard Shelby waives certain requirements in the existing law that would allow disaster victims to deduct more.

Under current law, to arrive at the deduction, a taxpayer must subtract $100 plus 10 percent of adjusted gross income from the total loss value. That means if a victim has a $20,000 loss, for example, and his adjusted gross income is $60,000, he would be entitled to a $13,900 deduction ($20,000 minus $6,000 minus $100).

Shelby’s bill would eliminate both the 10 percent requirement and the $100 floor. Under the above scenario, the tornado victim would be entitled to deduct the full $20,000.

The proposal, part of a package called the Southeastern Disaster Tax Relief Act, applies to storm victims in the declared disaster areas of nine states, including Alabama.

The cost of the proposed change would be an estimated $65 million across the nine states, according to preliminary estimates.

In sending an amended federal tax form, taxpayers claiming disaster losses on their 2010 return should write “Alabama/Severe Storms, Flooding, Straight-line Winds and Tornadoes” at the top and attach IRS form 4684.

At the state level, there is no choice of which year to claim a deduction for disaster damage — it must be the current tax year.

Still, state lawmakers have more potential tax relief in store for disaster victims.

On the last day of the session, the Alabama Legislature passed a bill that, if signed by Gov. Robert Bentley, will preserve tornado victims’ homestead exemption on their property taxes during the time their homes are under repair.

The same protection will be available in the future when property is damaged in any disaster such as a tornado or hurricane.

“This is going to be very worthwhile for thousands of people,” said Jefferson County Tax Assessor Gaynell Hendricks, who pushed for the bill. Hendricks asked state Sen. Priscilla Dunn and state Rep. Oliver Robinson to carry the bill.

Robinson said the legislation had no real opposition.

“It’s hard to vote (for) compounding sorrow in times of tragedy,” Robinson said. “That’s all this bill does is ease the pain.”

News staff writer Robin DeMonia contributed to this report.

Join the conversation by clicking to comment or email Oliver at moliver@bhamnews.com.

This entry passed through the Full-Text RSS service — if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers. Five Filters featured article: Ten Years Of Media Lens – Our Problem With Mainstream Dissidents.

Post Footer automatically generated by Add Post Footer Plugin for wordpress.