QUESTION: The 2008 Mother’s Day storm severely damaged my home in Bibb County.
Since insurance only partially paid for the damage, I would like to get a tax break. What can I deduct?
ANSWER: For income tax purposes, storm damage is considered a casualty loss. The dollar amount of your casualty loss is the decrease in fair market value of your property as a result of the storm or the adjusted basis of your property if that amount is smaller.
Once your casualty loss is determined, it must be reduced by the insurance reimbursements you received and then by an additional one hundred dollars.
Generally, a taxpayer can then deduct the resulting amount as an itemized deduction to the extent that the amount exceeds 10 percent of the taxpayer’s adjusted gross income (AGI).
However, a recent change in the tax law provides two additional income tax reduction opportunities for some taxpayers.
Taxpayers who suffer a casualty loss as a result of a federally declared disaster in 2008 or 2009 do not have to limit their casualty loss deduction by 10 percent of their AGI.
They also do not have to itemize to take a casualty loss deduction.
Since Bibb County was declared a federal disaster area as a result of the May 11, 2008, Mother’s Day storms, you qualify for these two new tax saving opportunities.
You may also get an even bigger tax break by claiming your 2008 casualty loss on an amended income tax return for 2007.
A complete list of Georgia counties that have been declared a federal disaster area and are eligible for these new tax breaks can be found at www.fema.gov.
QUESTION: I have recently opened my own business. One of my employees occasionally uses his personal car to run errands and call on customers for my business.
I want to pay him for this use of his personal vehicle. Is there a simple way to do this?
ANSWER: The standard mileage rate provides a relatively simple method to calculate the tax deductible cost of operating a vehicle for business.
Many employers use the standard mileage rate to reimburse employees who drive their personal vehicle for business purposes.
Generally, an employee does not have to include the reimbursement in income.
However, the amount paid to the employee is fully deductible by the employer.
Be sure to maintain adequate records to substantiate the number of business miles driven.
The standard mileage rate is currently 55 cents per mile for business miles driven after Dec. 31, 2008.
Since the business standard mileage rate is periodically adjusted to reflect the changing cost of operating a vehicle, you should watch for new rates in the future.
This column provides general information. Its contents should not be acted upon without specific professional advice. Steve and Judie Swinney are certified public accountants and financial consultants located in Macon. The Swinneys would like to answer reader questions in their column. Send questions to them at P.O. Box 27807, Macon, GA 31221-7807. Fax questions to them at (478) 741-8823 or e-mail them at AskTheCPAs@cox.net.