Home office / Casualty Loss

[R Power]

Landslide totally destroys home and home office creating a large casualty loss.

I have read, recently, in one of the tax journals (NAEA or NATP) that the portion of the casualty attributable to the home office is fully deductible on form 8829 the same as the property taxes and mortgage interest. This means this deduction could drive Sch C negative. It also bypasses the 10% adjustment and the $100 exclusion.

I have e mailed the journal for clarification but have received no response.

Does anyone "know" if this is true and does anyone have an official site on this issue?

Thanks,

R Power

[RLymanC]

Casualty Loss

Form 8829 is OK to use to calculate your casualty. Enter either direct or indirect and have the computer calculate your percentage.

HOWEVER, the loss will not reduce your business net income. The amount flows to form 4684 page 2 then to 4797 if this form is otherwise necessary. From there it goes to "other gains or losses" on page one of form 1040.

If your net income is $75,000 and have 10% of your home used for business and suffer a $250,000 casualty loss, your net income is still $75,000, and your above the line casualty loss is $25,000. The rest can go on schedual A.

All other business use of the home expenses will reduce net income, (in some cases there is a carryover) but casualty loss does not count as an allowable expense.

See line 33 and 34 on form 8829.