Hurricane Recovery Tax Benefits Explained

by John Kiernan on August 29, 2011

hurricane-recoveryFrom time to time, knowledgeable sources from around the personal finance industry send us timely information, hoping to use Wallet Blog to better reach the general public. The following information about hurricane recovery tax benefits was sent to us by the California Society of CPAs, and we thought it would be both useful and of interest to our readers:

Hurricane Irene has done an estimated $7 -13 billion in damage over 10 East Coast states. Wind and flood damage alone could total about $5 billion and $2 billion, respectively, according to the Consumer Federation of America.

Given the widespread devastation, many of you reading this were likely affected in one way or another. The following five steps can help you minimize financial loss and expedite recovery:

Step 1: Get in touch with your insurer.
It’s important that you contact your insurance provider as soon as you can because some policies have time limits for the filing of claims, and these limits vary by state.  When you call, make sure to explain the severity of the damage. Insurance companies may triage cases following a natural disaster, and if your house incurred significant damage, you’ll be attended to sooner than someone with minor damage. In addition, upon first contacting your insurer, provide up-to-date contact info, so it will be easy to get hold of you.

Given that a claim could be resolved immediately or take as long as six months to process, depending on the extent of damage caused by the storm, you might have to stay at a hotel or with friends.  In that event, you may be eligible for reimbursement for living expenses, possibly including food.  Insurance companies might even distribute ATM cards and cash to policyholders.

Step 2: Document, document, document.
It’s up to you to document your losses, so photograph damage, make an inventory of damaged/lost items and keep records of people you speak to about your damage.  Also, don’t forget that your car is covered under comprehensive insurance as well.

Better organization equals fewer problems, so if you don’t remember the value of certain items, call your bank or credit card company in order to request a list of your purchases.

In the future, you could also use the Insurance Institute’s home inventory software–a free program that lets you scan receipts as well as take pictures and inventory of what you have in your house. If you have the luxury of time, this is a good way to prepare for potential catastrophes.

In the present, if you’re  unhappy with the way in which your claim is settled, explain your perspective to the head of your insurance company’s claims department. If this doesn’t work, file a complaint with your state insurance department or hire an attorney.

You could also use your own insurance adjuster. A public  adjuster can assess your home’s damage, organize your claim and work with your insurer to maximize the return on your policy. In return, you typically pay them a percentage of your claim.

Public insurance adjusters are state-regulated, which means fees will vary. For additional info on public insurance adjusters, go to the National Association of Public Insurance Adjusters Web site at or call (703) 433-9217, and call your state government’s insurance commission for a background check on any public adjuster you’re thinking about hiring.

Step 3: Live with it — for now.
While you should not put your safety in jeopardy, try as best you can to only make minor, stop-gap repairs before an insurance adjuster assesses the damage.

This will help to ensure that you’re paid back for repairs. If you are currently underinsured or you have a sizable unreinbursed property loss, you may be able to deduct this from your taxes. Talk to your local CPA about certain tax benefits that are available to you – especially in president-declared disaster areas.

First, subtract any insurance you anticipate receiving. Then subtract $100. The loss must be further reduced by 10 percent of your adjusted gross income. The balance remaining is what you can deduct from your taxes.

If you think you might qualify for this deduction, collect your receipts, insurance statements, and other documentation and present it to your CPA.

Those who prepare their own taxes, should review the “Nonbusiness Casualty and Theft Losses” on the IRS Web site and contact their state income tax bureau to learn more about both the federal and state guidelines for this deduction.

Step 4: Watch out for scammers.
If your home was destroyed by a hurricane, be cautious. There are dishonest service providers that prey on disaster victims.

Don’t be rushed into signing a contract with any roofing or building company. Instead, collect business cards and get written estimates for the proposed job. Beware of building contractors that encourage you to spend a lot of money on temporary repairs.

Investigate the track record of any roofer, builder or contractor that you consider hiring. Look for professionals and get references. You can also call the Better Business Bureau for help. Never give anyone a deposit until you have done your homework.

Step 5: Help for the doubly-unlucky.
People who are still unable to go back home because of a previous hurricane should try to extend their additional living expenses. Usually you can utilize your additional living expense for a maximum of 12 months. But there may be some flexibility with your insurance company.

People who have exhausted their insurance go to the Federal Emergency Management Agency to get financial assistance. Their Web site is


nice post.nhome inventory proves to be extremely beneficial in times of need.n
November 1 at 11:26 am
2 Words... Home Inventory

Remind your family, friends, clients, and fans, particularly at a time when natural disasters are on the rise, that a photographic inventory of all their belongings, big and small, can be a lifesaver in the event their home is ever lost to fire, flood, or other disasters.

And maybe one day be their hero!
September 8 at 13:25 pm
Had no power or water for a week and had to move to a hotel for the duration - what can I do about the money I spent on the hotel?
September 6 at 11:30 am

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