Hurricane Sandy, which struck the New York and Mid-Atlantic region on October 29 and 30, left a trail of destruction and dislocation. Numerous homes and businesses were either destroyed or severely damaged and the loss of electrical power and other infrastructure damage was widespread. This article examines the tax consequences of the physical losses sustained in the storm as well as the tax incentives and relief provisions available to those impacted by the storm.
Generally, individuals may not deduct losses with respect to property unless such property was used in a trade or business or in an activity entered into for profit. Therefore, losses sustained on the sale or exchange of a personal residence or other items of personal property cannot be deducted. However, the Internal Revenue Code allows taxpayers who suffer casualty losses with respect to such personal use property to deduct the amount of the loss in computing taxable income.
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