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A personal casualty loss is determined by the smaller of either your cost basis in the house or the decline in fair market value
You cannot use repairs alone to determine the casualty loss
Fair market value is determined by what you would be able to sell the house for after the disaster
When you write off the casualty loss, you will need to reduce the basis in your home by the amount of loss you claimed
Accounting for these losses requires some estimates, and the IRS realizes that
So, work with your tax professional to make a good faith estimate of the FMV of the property immediately after the disaster
Also, you must reduce your casualty loss by any insurance proceeds you received.
So, if your insurance company reimbursed you more than the decline in Fair Market Value or the cost basis (whichever is less) then you would not have a deductible casualty loss
Here is a good IRS article about this topic: CLICK HERE
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"what you would be able to sell the house for after the disaster" how is it determined?
untill you actually sell it is a speculation
Yes, it is an estimate
The IRS realizes that this is an estimate, and that it is subjective.
You just simply make the best estimate you can.
There's no defined metric
got it , thanks
no, thank you
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