HOUSTON – (By Dale King, Realty News Report) – Just three months ago, first responders poured into the Houston area to render immediate aid to millions of people harmed, displaced, traumatized and left with ruined homes, businesses and lost belongings after Hurricane Harvey. The wave of wind and rain dumped 50-plus inches of water on a region that’s still dealing with its decimation.. Patrick O’Connor, president of O’Connor and Associates, a Houston-based tax consulting firm, has launched a Federal Tax Refund Program that gives home and business holders options to recover additional aid from the Feds. Essentially, residential or commercial property owners can either amend their 2016 federal tax forms or revise figures in preparation for their 2017 filing to reflect hurricane and/or flooding damage.
Realty News Report asked O’Connor to elaborate on the program.
Realty News Report: Addressing the overall Houston area real estate market, how would you describe the impact of Hurricane Harvey on the market going forward?
Patrick O’Connor: Harvey was a Category 4 storm on the Saffir-Simpson scale, but it was not the wind that devastated Houston, it was the rain and floods. Generally, floods cause greater property damage and more deaths than tornadoes or hurricanes, and the governor of Texas estimates the damage done by Harvey could run as high as $180 billion. Looking at Houston more specifically, 100,000 homes were flooded, as were between 10,000 and 30,000 apartments. Fifty thousand people are living in 20,000 hotel rooms being paid for by the Federal Emergency Management Administration.
Realty News Report: What should owners do if their property has been flooded?
Patrick O’Connor: Property owners who suffered such a loss due to Hurricane Harvey would likely qualify for a Federal Tax Refund. The first thing to do is notify the appraisal district that your house or business is flooded. Document the condition of the property now and as of year’s end. Send the appropriate documentation to the appraisal district — photos, bids, invoices for work done and information on prior flooding if any will help. If you do not report the flooding, the initial 2018 tax form will likely assume there was no flooding. Given the conservative nature of appraisal districts and appraisal review boards, it is unlikely the final value will exceed market value and be unequally appraised, requiring binding arbitration to achieve a reasonable result. You will need a market value appraisal of all flooded properties as of 1/1/2018, including in-depth analysis of the diminution in value due to having to report the property flooded.
Realty News Report: Can you explain how the Federal Tax refund program benefits flood victims?
Patrick O’Connor: Through federally implemented casualty deductions, the Federal Tax Refund Program is designed to securely hasten the process of providing a significant federal income tax refund for eligible flood victims impacted by Hurricane Harvey.
Realty News Report: What kind of percentages and numbers are we talking about for residential property?
Patrick O’Connor: Owners of property that flooded in Texas are eligible for a substantial property casualty loss tax deduction, typically for 10% to 30% of the value of the property before the flood. Consider the following example of what a property owner can save: A house was worth $300,000 before Harvey and $235,000 afterward, exclusive of physical damage. A $65,000 casualty loss could generate a federal tax savings of $29,000, based on a 45% tax rate. The appraisal fee was $650, or about 2% of the tax savings.
Realty News Report: How about for commercial property.
Patrick O’Connor: A commercial property was worth $6.5 million before Harvey and $5,100,000 after Harvey, for example, not considering the physical damage. The $1,400,000 deduction could reduce federal income taxes by 45%, or $630,000. The appraisal fee was $7,500, or about 1% of the tax savings.
Realty News Report: Suppose you already have flood insurance, and the insurance company has paid your flood damages in full. Are you still eligible to participate in the Federal Tax Refund Program?
Patrick O’Connor: Yes, you can receive significant tax savings regardless of flood insurance coverage. The Hurricane Harvey Federal Tax Reduction Program is here to help you reduce both your property taxes and federal taxes after such a devastating disaster.
Realty News Report: Does the Federal Tax Refund Program apply only to natural catastrophes?
Patrick O’Connor: No, it is also applicable to man-made disasters, such as the Las Vegas shooter. The criteria are that the incident must be sudden and unexpected. Certainly, we have technology today that predicts the arrival of a hurricane, but the actual arrival itself is still something that is sudden and destructive.
Realty News Report: This program can be used in any state?
Patrick O’Connor: Yes, it applies in any state where there has been a disaster. Property owners in Florida are also filing these claims, for example. As far as Texas is concerned, the Property Tax Reduction Program is in place to help affected individuals and businesses in such counties as Aransas, Austin, Bastrop, Bee, Brazoria, Calhoun, Chambers, Colorado, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Hardin, Harris, Jackson, Jasper, Jefferson, Karnes, Kleberg, Lavaca, Lee, Liberty, Matagorda, Montgomery, Newton, Nueces, Orange, Polk, Refugio, Sabine, San Jacinto, San Patricio, Tyler, Victoria, Waller, Walker and Wharton.
Realty News Report: What level of expertise is required to apply for the tax refund?
Patrick O’Connor: Any tax assistance firm can do it. You can even do it yourself. You just need to file a 1040X form. As for O’Connor, so far, 4,000 people have signed up with us in the first six weeks – and we didn’t do any marketing for the first month.
Realty News Report: Can you give us a thumbnail sketch of your firm?
Patrick O’Connor: We have been in business since 1974. Our team includes professionals with expertise in property tax, cost segregation and commercial and residential real estate appraisals. O’Connor has served more than 100,000 clients in tax reduction, with total tax savings of more than $500 million. We are frequently featured authors and experts in national media outlets such as The Wall Street Journal, The New York Times, USA Today and National Real Estate Investor magazine.