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2016 “Net Disaster Loss” Relief Available to Non-Itemizers & Taxpayers Subject to AMT

In general, no personal casualty loss (under Code Sec. 165(h)) can be claimed by a taxpayer who claims the standard deduction. Such losses can only be claimed as itemized deductions.

The standard deduction isn't allowed for purposes of the alternative minimum tax (AMT). Thus, a taxpayer who has taken the standard deduction for regular tax purposes must add back the amount of the deduction in computing alternative minimum taxable income (AMTI) and may not claim itemized deductions for AMT purposes.

New law. Effective for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026, if an individual has a net disaster loss (defined below) for any tax year beginning after Dec. 31, 2017, and before Jan. 1, 2026, the standard deduction is increased by the net disaster loss.

The Act also provides that, if any individual has a net disaster loss for any tax year beginning after Dec. 31, 2017 and before Jan. 1, 2026, the AMT adjustment for the standard deduction doesn't apply to the increase in the standard deduction that is attributable to the net disaster loss.

Raised Casualty Floor & Modified Threshold for 2016 Disaster Losses

In general, the deduction for casualty and theft losses of personal-use property under Code Sec. 165(h) is subject to two limitations: the $100 per-casualty floor and the 10%-of-adjusted-gross-income (10%-of-AGI) threshold.

New law. For tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026, the Act provides that if an individual has a net disaster loss, (i) the $100-per-casualty floor is increased to $500; and (ii) the 10%-of-AGI threshold doesn't apply.