It’s my annual “Taxes from A to Z” series! For the series, I’ll focus on terms that you might see on your tax forms and statements but not necessarily in the headlines. If you’re wondering whether you can claim wardrobe expenses or whether to deduct a capital loss, this is one series you won’t want to miss.
T is for Termite Damage.
You can deduct casualty losses related to your home, household items and vehicles on your federal income tax return. To claim a casualty loss, you must itemize your deductions on a Schedule A. But be careful: not all damage or losses are deductible.
A casualty is, according to the Internal Revenue Service (IRS), “the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual.”
That would include losses attributable to a car accident (even if it was your fault), earthquake, fire, flood, hurricane, tornado, terrorist attack or volcanic eruption – just to name a few.
To find out how to report a bona fide casualty loss, click here.
But what about losses that take a little longer? Even if those losses aren’t your fault, losses due to progressive deterioration aren’t deductible as casualty losses. Losses which do not stem from a sudden event – like termite or other insect damage – won’t qualify for the casualty loss deduction. Ditto for damage or destruction of trees, shrubs, or plants caused by a fungus, disease or pests. However, a plague of locusts might be an exception: the sudden destruction of property due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss.
