 Here we are in our example Form 1040 populated with LASERT tax software. You don't need tax software to follow along, but it's a great tool to run scenarios with. You can also get access to the Form 1040 related forms and schedules at the IRS website, irs.gov, irs.gov. Starting point, as usual, single filer Mr. Anderson, no dependents, 100,000 W2 income. We've got the 12,950 standard deduction getting us down to the 80,050, 87,050. Page two, calculating the tax line 1614774, starting with the $15,000 withheld getting us to the 226. Now we're focused on page one, however, the calculation of taxable income. And we're focused on the standard deductions and the itemized deductions, focusing more on the itemized deductions, which normally you wouldn't be taking the itemized deductions unless they add up to more... Point deducted. ...than what is on the standard deduction 12,950 for single filers 25,900 for married filing joint. However, when we're looking at federally declared losses, for example, or qualified losses, we could have a situation where the standard deduction isn't being cleared, but we're using the Schedule A to still get a benefit, even though we would in essence be taking the standard deduction, which you would think kind of makes sense if people had it like a disaster that would happen. But it's a little bit of a weird situation. So let's take a look at it now. If I open this up, we're going to go down to the Schedule A. So if I scroll down now, normally the thing that kicks people over to itemize are owning a home, which includes the mortgage interest on the home and the taxes that kick people over the threshold, possibly, or the most likely thing to kick people over the threshold to be itemizing, and then all this other stuff kicks in. We're focused down here on the casualty and theft losses. Now, this used to be a more expanded category. If you remember a few years ago, they've limited it a lot to, as you can see here, casualty and theft losses from a federally declared disaster, from a federally declared disaster other than net qualified disaster. So we have to attach form 4684. Now, the thing that's funny is that if it's a federally declared disaster, my interpretation is that you can basically level it up from there to a qualified disaster, in which case it would be more beneficial. There's a big difference between those two designations. And if it was a qualified disaster, it'd be pushed down here in essence to the other itemized deductions. And in that instance, even if you're not itemizing, you might get a benefit because it'll basically add in the standard deduction over here. So we'll still use the Schedule A, but you could get a benefit even if you're taking a standard deduction. So the bottom line is if you're thinking about these like a disaster that happened, you want to know the current location you're at, the disaster that possibly could have happened in that area that you might have to be dealing with, get more information on the IRS website related to it, as well as FEMA website, and then realize that even though it's going to be kind of pulled into the Schedule A, you might be in a situation where people that are not itemizing would still get kind of a benefit from it due to the calculation. Also note that if the disaster happened, you might in like 2023, for example, you might be able to choose whether or not you can take the loss in the year it happened, in that case 2023, which means you wouldn't actually file for it until April 15th of 2024, or possibly you might be able to take the loss on the prior year. So if it happened in 2023, we might be able to take the loss in the 2022 tax return, which if you hadn't yet filed that tax return, you could file or possibly if you had already filed it, you might have the option to amend the tax return. And in that case, you might get a bigger tax benefit if you take the loss in the year that the disaster didn't actually happen, because the year in which the disaster actually happened may have resulted in your income being a lot lower than it otherwise would have been. And because of the progressive tax system, you might not get as big a benefit from a deduction in the year with a lower income. Okay, so that said, the difference between the declarations, I'll just give a quick recap here, limitation on personal casualty and theft losses, personal casualty and theft losses of an individual sustained in a tax year beginning after 2017 are deductible only to the extent that the losses are attributable to a federally declared disaster. Okay, so personal casualty and theft losses attributable to a federally declared disaster, A disaster, a horrible, horrible disaster, are subject to the $100 per casualty and 10% of your adjusted gross income limitations. That's a big limitation even though they're federally declared disaster unless they are attributable to a qualified disaster loss. So now we've got this qualified disaster loss becomes important. Personal and casualty, theft losses attributable to a qualified disaster loss are not subject to the 10% of AGI limit and the $100 limit is increased to $500, an exception to the rule above limiting the personal casualty and theft deduction and losses attributable to a federally declared disaster applies to you have a personal casualty canes for the year. Okay, so it's important to kind of get the designation correct in other words and then we could have it then be applied to one of these two items. Let's first take the first kind of designation which is the less tax beneficial designation.