Key Takeaways
- The casualty loss deduction is a tax break available to taxpayers who suffer financial losses due to unexpected events such as natural disasters, car accidents, and vandalism.
- To qualify for a tax deduction, the loss must result from an identifiable event that is sudden, unexpected, or unusual, and the amount of the loss is generally the decrease in fair market value of the property or the adjusted basis in the property, whichever is less.
- The amount of the casualty loss deduction is reduced by any reimbursement from insurance or other source, and taxpayers must file a claim or forfeit their right to a tax deduction for the insured part of the loss.
- The $100 and 10-percent rules apply to all casualty losses, meaning that the first $100 of any loss cannot be taken as a tax deduction, and the loss must be reduced by 10% of the taxpayer's adjusted gross income.
Introduction
In addition to federal income taxes, U.S. citizens are liable for various state taxes as well. While some states do not levy a state income tax, all states assess some form of tax, such as sales or use taxes. And some of these taxes will require you to submit a separate state tax form each year.
State income tax forms
Only eight states in the country choose not to impose an income tax. Each of the other states that do will require you to file an annual state income tax return in addition to filing your federal return.
Although a majority of the states calculate your income tax similarly to the IRS, slight differences may exist in your federal and state tax forms. The starting point on most state income tax forms is your federal adjusted gross income, which you calculate using a version of IRS Form 1040, before you apply the various state specific exemptions, deductions and adjustments to calculate your taxable income for state purposes. If you live in one of the states that calculates your income tax using a flat rate, then your tax form will not resemble the federal one.
Attaching supplemental schedules
Most states that have an income tax do not require as many supplemental schedules as the federal Form 1040. Instead, many states require you to submit a copy of your entire federal tax return, including any schedules you attach such as a Schedule C for self-employment earnings or Schedule A for your itemized deductions.
In certain circumstances, you may have to attach an additional state schedule to your state tax return. For example, in California you must attach a Schedule P to your return if you are subject to the alternative minimum tax.
TurboTax Tip:
New rules make it easier for taxpayers to get tax breaks on casualty loss deductions. Non-itemizers can add qualified casualty losses to their Standard Deduction amounts.
Other state tax forms
In addition to income taxes, most states collect revenue from other types of taxes that require their own forms. For example, your state may impose an estate tax similar to the federal estate tax. If so, the state can create its own rules that require you to file an estate tax return even if the federal government doesn’t require one.
Similarly, some states impose an inheritance tax on beneficiaries who receive money or property when a friend or family member passes away, and will require you to report your inheritance on specific forms. Although these are just two examples, there is an array of other state taxes that individuals, businesses and trusts must prepare state tax forms for each year.
Similarities with federal tax forms
The most commonly used federal tax form for reporting income taxes is the 1040. In most cases, you will find that there is a single dominant form for your state income tax needs as well. This makes preparing your state income tax return much easier since you can transfer your federal information onto your state tax return. And if you use tax preparation software such as TurboTax, the information you report on your federal return automatically transfers to any state income tax forms you need to prepare. For example, California allows taxpayers to file their state income tax on Form 540 or 540 2EZ. The complexity of your tax situation dictates which forms you can file with.
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