|
IRS Summertime Tax Tip 2009-17
Taxpayers who find themselves the victim of a natural disaster or theft this
summer should know the rules for deducting their casualty losses next year when
they file their federal tax return. Generally, you may deduct losses to your
home, household items and vehicles on your federal income tax return.
Here are ten things the IRS wants you to know about deducting casualty or
theft losses.
1. 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.
2. A casualty does not include normal wear and tear or progressive
deterioration from age or termite damage.
3. The damage must be caused by a sudden, unexpected or unusual event like a
car accident, fire, earthquake, flood or vandalism.
4. 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.
5. 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.
6. To claim a casualty or theft loss, you must complete Form 4684, Casualties
and Thefts, and attach it to your return. Generally, you may claim casualty or
theft loss of personal use property only if you itemize deductions on Form 1040,
Schedule A. However, you can deduct a 2008 or 2009 net disaster loss from a
federally-declared disaster even if you do not itemize your deductions.
7. If the property was held by you for personal use, you must further reduce
your loss by $100. This $100 reduction for losses of personal-use property
applies to each casualty or theft event that occurred during the year other than
2009. For 2009, individuals must reduce their casualty and theft losses for
personal-use property by $500 instead of $100. This $500 reduction for losses of
personal-use property applies to each casualty or theft event.
8. The total of all your casualty and theft losses of personal-use property
usually must be further reduced by 10 percent of your adjusted gross income. The
10 percent AGI limitation does not apply to net disaster losses resulting from
federally declared disasters in 2008 and 2009.
9. In figuring your loss, do not consider the loss of future profits or
income due to the casualty.
10. Casualty losses are normally deductible only in the year the casualty
occurred. But if you have a deductible loss from a federally declared disaster
you can choose to deduct that loss on your tax return for the previous year. If
you have already filed your return for the preceding year, you can claim the
loss on the previous year tax return by filing an amended return.
For more information about casualty and theft losses and the special rules
for net disaster losses see Publication 547, Casualties, Disasters and Thefts
available on the IRS.gov Web site or by calling 800-TAX-FORM (800-829-3676).
Links:
Tax Relief in
Disaster Situations
Publication 547, Casualties,
Disasters and Thefts
Form 4684, Casualties and
Thefts
|
