HOW TO CLAIM CASUALTY LOSSES

A casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected, and unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption.

If your property is not completely destroyed, or if it is personal-use property, determine your loss from a casualty by first figuring the decrease in fair market value of your property.

If the property was held by you for personal use, you must further reduce your loss by $100. The total of all your casualty losses of personal-use property must be further reduced by 10% of your adjusted gross income.
If your business or income-producing property is completely destroyed, the decrease in fair market value is not considered.
If your main home, or any of its contents, is damaged or destroyed as a result of a disaster in a Presidentially declared disaster area, do not report any gain due to insurance proceeds you receive for unscheduled personal property, such as damaged furniture, that was part of the contents of your home.
You can choose to postpone gain from any other insurance proceeds received for your main home or its contents if you purchase replacement property within four years after the close of the first tax year in which any gain is realized. For this purpose, insurance proceeds received for the home or its contents are treated as being received for a single item of property, and any replacement property you purchase that is similar or related in service or use to your home or its contents is treated as similar or related in service or use to that single item of property. Again, postponement of gain is only available if the amount you spend on replacing or repairing your property is equal to, or exceeds, the insurance proceeds you receive. Otherwise, you must recognize gain to the extent that the insurance proceeds are more than the cost of your replacement property. Renters qualify to choose relief under these rules if the rented residence is their main home.
If your home is located in a Presidentially declared disaster area and your state or local government orders you to tear it down or move it because it is no longer safe to live in, the resulting loss in value is treated as a casualty loss from a disaster. Figure your loss in the same way as any other casualty loss of personal-use property. The State or local government order must be issued within 120 days after the area is declared a disaster area. This are the general rule, and they are exceptions. (Source IRC.)

Hurricane IKE disaster relief

IRS:
IF you live in a IKE disaster area:
Tax return filing, tax payments, and certain other acts are postponed ‘til Jan 5, 2009. Applies to individuals as well as businesses. However, you must inform the IRS before taking the relief.
Casualty losses can either be claimed this year or on last year tax return, you have the option. Call your accountant which alternative benefits you the most.
State of Texas:
If you live in the IKE disaster area:
Labor charges for repair or remodeling performed on residential property are not subject to sales tax. However, materials used during the repair or restoration are taxable, even in a disaster area. Make sure that the contractor calls for a single charge that includes materials and labor.
Motel and Hotel taxes suspended for 14 days beginning Sept. 8, 2008.