Insurance didn’t cover hurricane tree damage? The IRS might.

This tax season could bring relief for some property owners who saw Hurricane Matthew damage — including uninsured trees that fell.

Damage to houses, trees, landscaping and vehicles might be eligible as a casualty-loss deduction on federal income tax forms, said Dean Cochenour, a certified public accountant and principal with Carey & Company, P.A., of Hilton Head.

“Casualty loss is sudden damage to a property from an unexpected event,” he said.

Cochenour said it is important to understand that the federal government does not define damage in the same way insurance companies do. This means some damage not covered by insurance might be eligible as a tax deduction.

About 2,800, or 14 percent, of the 19,688 structures on Hilton Head Island sustained significant damage in the Oct. 8 hurricane, said Shawn Colin, the town’s deputy director of community development. That total represents only structures with damage that needed permits to fix, he said.

Charles Cousins, town director of community development, said many people had damage not covered by insurance.

“We have talked to many people who had damage beyond the building,” he said. “I don’t think a lot of people know about these tax options, either.”

Not everyone, though, will qualify for the deduction, Cochenour said, noting those who apply will have to show a “measurement of loss.”

This includes:

▪  Using an appraiser to establish the fair market value of the property immediately before and after the storm, or providing receipts to show the cost of repairs to restore the property to its pre-hurricane condition.

▪  Subtracting any insurance proceeds and a $100 insurance deductible from the difference in the market values or actual repair costs; and

▪  Subtracting 10 percent of the tax filer’s adjusted gross income.

“The 10-percent-of-adjusted-gross-income becomes a factor for most taxpayers,” Cochenour said.

Cochenour gave an example of a house with a market value reduced from $500,000 to $450,000 because of the hurricane. Subtracting $20,000 in insurance proceeds and the $100 insurance deductible from the $50,000 difference in market values would leave $29,900 eligible for the tax deduction before the adjusted-gross-income factor is applied.

A tax filer with an adjusted gross income of $200,000 would then need to subtract $20,000 to meet the 10 percent requirement. In the end, the filer could claim a $9,900 deduction.

Taxpayers eligible for a casualty-loss deduction can file an amended 2015 tax return or claim it on their 2016 return, Cochenour said.

The deadline to amend the 2015 form is Oct. 15, he said. An extension for the 2016 tax return also can be filed, which would delay the due date to Oct. 15.

“I have seen numerous people taking extensions this year because of hurricane damage,” Cochenour said.

This story was originally published March 31, 2017 at 12:58 PM with the headline "Insurance didn’t cover hurricane tree damage? The IRS might.."