Deduct the Dogwoods: Tax Deductions for Winter Storm Uri Landscaping Expenses | Gray Reed
When Texas froze in February, I learned a few things: i) snowstorms have names, and ii) people in my neighborhood aren’t particularly good at covering plants. Those poor sago palms never stood a chance.
Compared to the damage to homes and burst pipes across the state, clearing the flower beds after Winter Storm Uri may be a minor inconvenience, but there was a lot of dead leaves that needed to be replaced and removed across Texas. Taxpayers should remember that these storm-related landscaping costs could be eligible for a loss deduction on their income tax returns. As special tax regulations apply to federally reported disasters, possible deductions for property owners include the cost of removing the damaged plants, measures to preserve the bushes and any replanting costs required to bring the property back to its approximate value before the accident .
A disaster loss is defined as a loss attributable to a federally declared disaster as per a statement by the president. President Biden’s declaration of a federal disaster in Texas, Oklahoma and Louisiana due to winter storm Uri allows residents of those states to file losses on their tax returns. Taxpayers have the option of making this deduction in 2020 if they have not yet submitted their tax return for the year, or in the upcoming tax return for 2021. These qualified catastrophe losses can be made without specifying further deductions. The qualified disaster-related loss is simply added to the standard deduction. In addition, the losses need not exceed 10 percent of the taxpayer’s adjusted gross income before taxpayers are entitled to bear the loss.
The amount of damage is generally determined on the basis of the decrease in the market value of the property due to the damage caused by the storm, calculated as the difference between the value immediately before the disaster and the value immediately after it. Depending on the amount of damage claimed, taxpayers can calculate their deduction using the following methods:
- De minimis. For losses less than $ 5,000, taxpayers have a good faith estimate of the cost to restore the property to its condition immediately before the storm.
- Estimated cost repair method. For losses less than $ 20,000, taxpayers can use the smaller of two repair estimates prepared by separate and independently licensed contractors that list the cost of restoring the landscaping.
- Insurance method. Taxpayers can use the reports prepared by their homeowners or flood insurance companies if the reports include the estimated loss caused by the damage.
- Assessment of the disaster loan. Taxpayers can use an estimate to obtain a federal loan to help determine the estimated loss. and
- Safe haven contractor. Taxpayers can use the price specified in a contract drawn up by an independent and licensed contractor to determine the decline in the fair value of residential real estate for personal use.
Taxpayers should remember to reduce the loss by the amount of insurance proceeds, reimbursements, grants or other compensation received.