Ikito's AGI was $68,000 in 2019.In August 2019, his home was damaged in a hurricane and his county was declared a federal declared disaster area, The home's fair market value was $110,000 before the storm and $70,000 after the storm.He received only $12,000 from his insurance company due to the large deductible that applies to hurricane losses.He had purchased the home five years ago for $90,000.How much may Ikito deduct as an itemized deduction for this casualty loss?

Question

Quizplus · Accepted Answer

To calculate the casualty loss deduction, you first determine the decrease in fair market value due to the casualty, which is $110,000 - $70,000 = $40,000. Then, you subtract any insurance reimbursement, which is $12,000, resulting in a net loss of $28,000. However, for personal casualty losses related to a federally declared disaster, you must also subtract $100 and 10% of the taxpayer's AGI. Ikito's AGI is $68,000, so 10% of that is $6,800. Therefore, the deductible amount is $28,000 - $100 - $6,800 = $21,100.

Ikito's AGI Was $68,000 in 2019