DEDUCTIONS
 
 Itemized Deduction-Casualty/Theft
  Casualty and Theft losses
 
Usually you can only deduct on your tax return a casualty loss - one with a sudden, unexpected or unusual cause - in the tax year it occurs. And you're allowed to claim only the amount of the loss that exceeds 10% of your AGI after subtracting $100 for each casualty on your tax return.

For more information on Casualty and Theft Loss itemized deductions
  Can I deduct Casualty or Theft Losses on my tax return?
  Losing personal or business property due to a casualty, i.e. fire, flood, hurricane, or theft or other similar event is devastating, but some casualty or theft losses can be recouped through income tax breaks on your tax return.

If you have a casualty or theft loss, you may be entitled to a casualty or theft loss tax deduction on your tax return. A casualty loss is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual in nature. It can also be a government-ordered demolition or relocation of a home that's unsafe because of a disaster.

Other examples of casualty losses include car accidents, fires, and vandalism. If your property is covered by insurance, you cannot deduct on your tax return a casualty or theft loss unless you file a timely insurance claim for reimbursement. If insured, a claim must be filed even if no reimbursementis expected.

Some casualty or theft losses are not tax deductible on your IRS tax return, such as the ones below:
  • Accidental loss of a ring from your finger;
  • A fire set on purpose by the owner;
  • A well that goes dry;
  • Carpet beetle damage;
  • China plates broken by a pet;
  • Damages to property caused by excavations on adjoining property;
  • Damages for personal injuries or property damage to others caused by your negligence;
  • Damage to a crop caused by plant diseases, insects, or fungi;
  • Damage from rust or corroding of the understructure of a house;
  • Damage to property from a government construction project;
  • Damages to property from drought in an area where a dry spell is normal and usual;
  • Dry rot;
  • Engine damage caused by failing to use anti-freeze;
  • Expenses to move to, and rent for, temporary quarters;
  • Eye glasses or a watch dropped on the ground;
  • Injuries from tripping over a wire;
  • Legal expenses for defending a suit regarding your negligent operation of your personal automobile;
  • Legal expenses to recover personal property wrongfully seized by the police;
  • Loss of an ill lawyers earnings;
  • Loss of a valuable dog that strayed;
  • Loss of a private liquor stock in an improper police seizure;
  • Loss of a contingent interest in property because of the unexpected death of a child;
  • Loss of jointly held property taken by the other joint tenant;
  • Loss of luggage aboard a ship;
  • Loss of personal property while in storage or transit;
  • Losses from natural phenomena;
  • Loss of trees from diseases;
  • Money paid to a public library for a book you damaged;
  • Moth damage;
  • Sudden drop in the value of securities;
  • Termite damage;
  • Temporary fluctuations in value

People who suffer a casualty or theft loss may be able to deduct on their tax return the casualty or theft loss when they itemize tax deductions on their tax return. The amount of total casualty or theft losses that exceed 10% of adjusted gross income (AGI), after subtracting the $100 floor for each occurrence, maybe deducted on your tax return. It's basically a three step process:
  • Calculate the decrease in the property's fair market value that is the difference between the property's value immediately before and immediately after the casualty loss. Compare this with the adjusted basis of the property. Use the lower of these two amounts;
  • Reduce this amount by any insurance or other reimbursements you receive or expect to receive;
  • Reduce this figure twice, first by $100, and then by 10% of adjusted gross income. What's left, if anything is tax deductible as a casualty or theft loss on your tax return.
 Casualty or Theft Loss Tax Deduction Rules
  These tax rules apply to a casualty or theft loss of nonbusiness property.
 
$100 Rule
10% Rule
Definition of Rule
You must reduce each casualty or theft loss by $100 when figuring your tax deduction. Apply this rule after you reduce your loss by any reimbursement.
You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Apply this rule after you reduce each loss by any reimbursement and by $100 (the $100 Rule).
 Single Event
Apply this rule only once, even if many pieces of property are affected.
Apply this rule only once, even if many pieces of property are affected.
 More Than One  Event
Apply this rule to the loss from each event.
Apply the rule to the total of all your losses from all events.
 More Than One  Person
With loss from the same event (other than a married couple filing jointly.)
 Apply the rule separately to each person. Apply the rule separately to each person.
 Married Couple
with loss from the same event:

Filing joint IRS tax return

Filing separate IRS tax return


Apply this rule as if you were one person.


Apply this rule separately to each spouse.		 Apply this rule as if you were one person.


Apply this rule separately to each spouse.
 More Than One  Owner
(other than a married couple filing jointly.)
 Apply this rule separately to each owner of jointly owned property. Apply this rule separately to each owner of jointly owned property.

If the casualty loss results from a natural disaster and the President declares your area a disaster area, the casualty loss may be deducted on your tax return within the above limits on this year's tax return or on an amended tax return claiming the casualty loss for last tax year. If a casualty loss was suffered because of a disaster in a designated disaster area, consider amending last year's tax return.


To claim a casualty or theft loss, you must complete Form 4684, Casualties and Thefts, and attach it to your tax return. A nonbusiness casualty or theft loss may be claimed only if you itemize tax deductions on Form 1040, Schedule A.