Tax reminder: don’t forget to claim any eligible casualty, disaster & theft losses

If you had an un-reimbursed loss of more than $500 due to fire, theft, or natural disaster, you may be able to claim that on your taxes. According to the IRS:

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

A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and it must have been done with criminal intent.”

Losses that may be eligible include:

  • Un-reimbursed losses due to theft, fire, accidents, storm damage, or similar events if losses are greater than $500 and 10% of your adjusted gross income. (This would include money that you paid in a deductible)
  • Losses that occurred in federally declared disaster areas. See: 2009 Federally Declared Disasters
  • Financial losses due to insolvency or bankruptcy of a bank or financial institution

Types of losses that wouldn’t be deductible:

  • Home or household damage that is gradual, progressive, or the result of normal wear and tear
  • Items that you lose, break, or damage in the course of normal use

If you have insurance, you must have filed a timely insurance claim. Any reimbursement you received from insurance must be taken into account and subtracted when figuring your loss. This includes any expected reimbursement even if you have not yet received it.
To claim a deduction for casualties and theft, you need to use Form 4684. Here are Instructions for Form 4684
For more information:
The go-to source for all information on tax deductions is the IRS. The booklet Casualties, Disasters and Thefts – 2009 Tax Returns explains the tax treatment of casualties, thefts and losses on deposits. It includes the following information:

  • Definitions of a casualty, theft, and loss on deposits.
  • How to figure the amount of your gain or loss
  • How to treat insurance and other reimbursements you receive
  • Deduction limits
  • When and how to report a casualty
  • Special rules for disaster area losses

Other resources
Should you do your own taxes? See how you fare on this 25 question tax quiz
If you are filing your own taxes or gathering your documentation for your accountant, use this handy tax checklist.