J.K. Lasser's 1001 Deductions and Tax Breaks 2023, 3rd Edition

CHAPTER 12Insurance and Catastrophes

• Casualty, Theft, and Disaster Losses

  Disaster Relief Payments

  Damages

  Disability Coverage

  Accelerated Death Benefits

  Legal Fees

  Identity Theft Losses

  Tax Identity Theft and Relief

Alert

At the time this book was published, Congress was considering tax changes that could affect 2022 tax returns and planning for 2023. Check the online Supplement in February 2023 at www.jklasser.com or www.BigIdeasForSmallBusiness.com to see what changes have been enacted and when they become effective.

No one likes to think about bad things happening, but happen they do. The COVID‐19 pandemic—a national disaster—lingered into 2022. Natural disasters, accidents, building collapses and explosions, rioting and terrorist activities, and war all present serious personal and financial threats that can become reality. When faced with such catastrophes, insurance may carry you just so far, with economic losses outstripping your insurance recoveries. If the losses to personal‐use property occur in federally‐declared disaster areas, you may be able to deduct them.

This chapter explains the tax rules related to insurance and certain catastrophes. Mortgage insurance is covered in Chapter 4. Losses to your bank deposits are discussed in Chapter 8. For more information, see IRS Publication 547, Casualties, Disasters, and Thefts (Business and Nonbusiness); IRS Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal‐Use Property); and IRS Publication ...