Solutions for the Casualty Loss Problem
Tax laws severely limit who can deduct losses on their tax return caused by a catastrophic event. Now unless a loss is in a presidentially declared disaster area, victims are on their own to pick up the pieces. This is creating problems for those on the fringe of a major disaster and those who have a local casualty loss like a local flood or fire.
With tax savings no longer available to help cover some of the damages, victims need to find relief in other areas. Here are some possible solutions to help fill this void for those in your community:
Send a gift. While direct gifts are not tax-deductible, the IRS allows gifts of cash or property to any one person valued up to $15,000 each year without having to report it on a gift tax return. Check with the victim to see if they have any specific needs. Maybe you have an extra car or some furniture that you can spare.
Start a crowdfunding campaign. Organizing a fundraiser on websites like GoFundMe or Fundly is a great way to raise money for someone suffering a disaster. Once created, you can share on social media to raise awareness and ask others to join you in support. This approach can take the form of many small donations adding up to a large gift for the victim. Be aware that donations to individuals, even through crowdfunding, are also considered gifts.
Offer your time. Volunteering your time is often more valuable than a financial gift. After experiencing a loss, victims will feel pulled in multiple directions. Helping with cleanup or repairs, organizing meals, watching children, or offering your expertise are some examples of how you can reduce their burden. Try to coordinate your efforts with local charities as they will be better able to use your talents where they are needed.
Donate to charity. There are many reputable charities and local churches that are ready to help when disaster strikes. These organizations rely on donations to continue to provide for people in need. Just make sure the charity is legitimate before you give them your money. Websites like CharityWatch and Charity Navigator are good resources for identifying trustworthy charities. Remember, charitable donations to qualified charities are tax-deductible as an itemized deduction, so keep good records and save receipts.
Be a watchdog for scams
Opportunists and scammers come from every direction when losses occur. Their goal is to exploit the victim’s suffering and inexperience with the situation to benefit themselves. Fraudsters may set up fake charity funds or pose as inspectors, building contractors or even government agents.
With so many things to handle and emotions to process, the victim may be too overwhelmed to see through a scam. Here is where you can help. Take a skeptical approach to anyone soliciting business from the disaster and don’t trust anyone who asks for money.
Thankfully, victims living in presidentially declared disaster areas can still deduct casualty losses on their taxes, but people suffering localized losses cannot. Any assistance you can provide will help ease their suffering during a difficult time.