Do you Know That you Can Claim Casualty and Theft Losses On your Personal Tax Return?
Claim Casualty and Theft Losses ,Many people are not aware, and thankfully so, that in some instances the IRS will give a tax deduction for casualty, theft, and disaster losses relating to a home, household items, vehicles, and other tangible personal property owned by individual. If your property is destroyed, damaged, or stolen due to casualty or theft, you may be entitled to a tax deduction. A casualty is a damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, and unusual.
A sudden event is one that is swift, not gradual or progressive. It does not include damage from events such as termite infestation or deterioration from normal wind and weather.
What is a Casualty?
A casualty, for federal income tax purposes, is a sudden, unexpected, or unusual loss or damage to some property you own.
If something bad happens to your property, such as a flood, fire, vandalism or theft that is out of your control, the losses associated with that bad event are called casualty losses. Typically these bad events are sudden, unexpected or unusual. Casualty losses can be fully or partially deductible. There also typically needs to be some external force at play rather than something being lost or damaged due to your own negligence.
Casualty losses can include the following events:
- Terrorist attacks
- Car accident (if not caused by your negligence)
- Storms and aftermath
- Fires (as long as the fire is not arson)
- Mine cave-ins or shipwrecks
- Volcanic eruptions
- Government-ordered demolition
- Oil spills
The amount you can deduct from a casualty loss depends on whether the property involved was stolen, completely destroyed or partially destroyed. It also depends on whether the property was covered by insurance.
You must reduce the deduction by the amount recovered from insurance and, if the loss is fully recovered by insurance, you do not get a deduction at all.
A theft is when someone steals your property and includes:
- Kidnapping for ransom
To claim tax relief after a casualty or theft, you must provide proof of loss. You must prove that your property was damaged from disaster or theft, and that you were the owner of the damaged assets. The IRS also needs to know whether you’ve filed an insurance claim to recover or repair your property, and whether you can reasonably expect your property to be found or fixed.
Few basic considerations that will help you while deducting any casualty or theft losses.
- A casualty does not include normal wear and tear or progressive deterioration from age or termite damage.
- You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement. You must reduce your loss by the amount of the reimbursement.
- If your property is not completely destroyed or if it is personal-use property, the amount of your casualty or theft loss is the lesser of the adjusted basis of your property, or the decrease in fair market value of your property as a result of the casualty or theft, reduced by any insurance or other reimbursement you receive or expect to receive.
- The damage must be caused by a sudden, unexpected or unusual event like a car accident, fire, earthquake, flood or vandalism.
- If business or income-producing property, such as rental property, is completely destroyed, the amount of your loss is your adjusted basis in the property minus any salvage value, and minus any insurance or other reimbursement you receive or expect to receive.