The ice storm we all experienced at the end of January 2010 caused varying amounts of damage to just about every home in Southwest Oklahoma. As we continue to clean up, we need to utilize the tax laws to reduce the financial impact of the damage caused by the storm. We can claim a tax deduction for the casualty loss of personal-use property. A casualty loss is the damage or loss of property caused by a sudden or unexpected event such as the ice storm, tornado or flood. Such losses to our homes, trees, cars, even food in the refrigerator or freezer, and other equipment or property we use personally qualifies as a casualty loss and can be a tax deduction.
In the case of trees or landscaping, the amount of your deduction is generally the decrease in the fair market value of your property due to the event. The cost of cleaning up and putting the property back to its original condition may be used as the measure of the decrease in fair market value. Any activity, which increases the value of your property above the value before the casualty, is not allowed as a tax deduction.
You may measure the loss in value to your landscaping by what you spend on 1) the removal of damaged trees, 2) pruning to preserve the trees, and 3) replanting to restore the property to its value before the casualty.
If you’re a do-it-yourself’er and are cleaning, pruning, and replanting yourself, track all your out-ofpocket costs including materials and supplies. If the damage is sizable, strongly consider hiring a qualified appraiser to determine the decrease in value to your property. The cost of the appraisal and the potential tax benefit must be considered in deciding if the tax benefit outweighs the cost of the appraisal.
Putting the landscaping back to the original condition is not possible when large shade trees are damaged so badly they have to removed. When this occurs, it is not possible to return your landscaping to its previous condition by planting a tree from the local nursery. In these cases the value of the tree or trees lost needs to be determined and documented to claim your tax deduction. To accomplish this, you will need to obtain the services of a consulting forester or arborist who does landscape tree appraisals.
Landscape tree values vary greatly, depending upon the location, size, health and specie of each tree. Tree value can vary from less than 100 to 1,000′s of dollars. It is all dependent on the value the tree had in the landscape. The cost of the appraisal, the value of the lost landscape trees and clean-up is tax deductible.
Keep in mind that you can only claim a tax deduction for losses that were not paid by insurance or any other means. In short, out of pocket expenses and decline in fair market value is all that is eligible for tax deduction.
Lastly, take pictures…lots and lots of pictures both before cleanup and after cleanup.