Flood damage can be devastating, but learning that you are not covered by insurance can be even more traumatic. Uninsured losses can be costly, but in many cases, they are tax-deductible.
Definition of an Uninsured Loss
An uninsured loss is simply a loss at your home, car or business that is not covered by insurance. In an uninsured loss, the person does not have insurance or their insurance does not cover the type of loss that is experienced. It is also possible for a person to be underinsured, which leads to an uninsured loss.
Types of Uninsured Losses
An uninsured loss can take many forms. One of the most common types of uninsured loss is a home flooding when the homeowner does not have flood insurance. An example of an underinsured loss would be a person not having enough insurance to cover the total cost of a theft or damaging storm. The balance not covered would be an uninsured loss.
Uninsured losses can have a dramatic and negative financial impact on a person's net worth. Fortunately, a certain percentage of an uninsured loss is tax-deductible. While you will not be able to deduct the entire loss, it is possible to deduct a fair amount of it. It is best to consult a tax attorney.
Supporting Documents are Necessary
To take the tax deduction, you must have detailed records and an inventory list of the destroyed property. Verification will be necessary to claim the deductions, and if you are audited, detailed records will be required.