Today TaxMama hears from James in Delaware, with this problem. “We were robbed in January and the cost of items stolen well exceeded the insurance companies total reimbursement of (10%). Can we claim any of the non covered loss in the 2009 tax year and how?”
That must have been a terrible experience!
And naturally, policies have deductibles. Unfortunately, so has IRS.
Before you can take a deduction for casualty loss (thefts are included), you have to reduce the total loss by two factors:
1) 10% of your adjusted gross income (AGI), which is the last line on page 1 of your Form 1040.
2) Plus an additional $100.
In the EA class this week, one of my students asked, why the $100? Who knows. Ask your legislators why they dream up this nonsense!
Let me give you an example of how this works. Suppose your insurance company didn’t reimburse you for $5,000. Let’s say you are a couple, both working. Your combined wages are $60,000 and you have no other income or adjustment. 10% of AGI is $6,000. So you would have to reduce your theft loss by $6,100 before you could deduct a single penny. So if the loss is only $5,000, there’s no point in going through the exercise.
Here are some resources to help you (Look for working links in the Resource Box below):
IRS Publication 547 can explain all the details. http://www.irs.gov/publications/p547/index.html
IRS Publication 584 is a workbook you can use for personal losses http://www.irs.gov/pub/irs-pdf/p584.pdf
Use Section A of Form 4684 to report the losses. http://www.irs.gov/pub/irs-pdf/f4684.pdf
Incidentally, if the theft loss had been for business items, there are no limitations on business losses. Those are reported on Section B of the Form 4684. I do hope this helps.
And remember, you can find answers to all kinds of questions about casualty losses and other tax issues, free. Where? Where else? At TaxMama.com.
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- IRS Publication 547 :: Casualty, Theft and Disaster Losses
- IRS Publication 584 :: Workbook for personal Casualty, Theft and Disaster Losses
- IRS Form 4684 :: Reporting Casualty, Theft and Disaster Losses