Was your house shaken and damaged by last year’s Great Northeast Flood? Did you empty your wallet to repair those basement walls? Were your tools and equipment drowned forever? You may be eligible for a substantial federal “casualty loss” tax deduction – if you act now. The least you need to know:
1. Not all losses are casualties! Generally a tax casualty must result from theft, fire or other “sudden natural phenomenon. Did you accidentally lose a ring from your finger? Was your chinaware broken by a family pet? O,r did you accidentally kill your engine by forgetting to put in anti-freeze? Others have (yes) tried and lost.
2. You must offset any expenses you paid by insurance reimbursements received. Sorry – no “double-dipping” allowed. 
3. Feeling smart because you paid to guard against future disasters – maybe you put in a new storm drainage system?. Great! But the deduction only applies to the extent you restored the property to its “original condition”.
4. The big nut in this process is the cost of the loss. There are several options. The best requires a written appraisal of the house’s value immediately after the disaster – before any reconstruction. But this was probably not the first thing on your mind. More likely, you may use the option of deducting the cost of actual (unreimbursed) repairs made. You may also deduct any personal property destroyed because of the disaster – tools and equipment for instance. For many people this was their greatest unreimbursed loss.
5. Here is the biggie: the tax law has changed and there is a much higher threshold for deducting losses in “federal disaster areas” for 2010 than there was in 2009. So the general recommendation is to amend your 2009 return – and you must do so by April 18, 2011. (There is a special provision that allows you to go back one year).
6. You may NOT deduct “death of a saddle horse after eating a silk hat”. Don’t even try. 
Every situation is different and this is a complex subject. Consult a tax advisor for further details.