The Sand Fire and Tax Credit Relief

 We wish to express our warmest wishes to those who suffered loss due to the Sand Fire, and thank the thousands of firefighters who risked their lives to protect the citizens of the SCV and adjacent areas.
For those who suffered personal or business property damage, there is some good news. Tax payers may claim credits because the Governor declared a state of emergency for areas affected by the fire. The provisions for claiming a tax credit are that you sustained the loss within the area of the emergency and your loss was a direct result of the declared disaster. You will usually qualify for a casualty loss deduction when insurance or other reimbursements  do not repay you for damage to your property. If you file an insurance claim, you may only deduct the part of the loss that is not covered. Also, since the Sand Fire was declared a state of emergency by the Governor and not the President, Sand Fire losses do not qualify for federal purposes.
You can claim your loss for either tax year 2016 or 2015. The Franchise Tax Board will allow you to claim loss for 2015 to reduce your 2015 tax liability and to generate a refund the State can issue quickly. Being you probably already filed your 2015 taxes, if you wish to claim the loss for 2015, you must complete Form 540X. Your election to claim your loss for 2015 must be made by April 15, 2017. If you wish to claim your loss on your 2016 return, you will need to complete Form 540/540A, California Income Tax Return.
To calculate the amount of your loss:
1. Determine your cost of the property before the fire.
2. Calculate the decrease in fair market value as a result of the fire.
3. From the smaller of the amounts, subtract any reimbursement you expect to receive.
4. Apply the deduction limits to determine the amount of your deductible loss.
We recommend you contact your tax professional to make the appropriate choice regarding whether you should submit your claim for 2015 or 2016. Your tax preparer can also help you determine the amount. Also, you are welcome to contact our office. We will be happy to answer your questions.
For more information, call Professional Tax Services at 661-259-1967. Professional Tax Services provides unlimited complimentary tax planning advice to their clients through our EZ2 Thrive Program. For more information, visit www.scvprotaxservices.com.