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Observe new modifications in casualty and theft loss rules in ’09

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The highly publicized “bailout law” passed last year—the Emergency Economic Stabilization Act of  2008—extended a number of tax breaks that had officially gone off the books. But other tax changes in the new law have flown under the radar.

Alert: Be aware of new modifications in the rules for casualty and theft losses. Significantly, the new law provides a unique tax break for disaster-area victims, but reduces deductions for other personal casualty and theft losses.

Here’s the whole story: Under long-standing rules, you may deduct personal casualty and theft losses only to the extent the annual total exceeds 10% of your AGI after subtracting a $100 floor per event. In contrast, there’s no 10%-of-AGI floor or $100 floor for losses sustained by a business.

The same rules generally apply to losses suffered in disaster areas, such as counties hit hard by hurricanes or wildfires. But victims in these areas may be eligible fo...(register to read more)

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