Casualty and Theft Losses- what insurance and other reimbursements should be included?

Casualty and Theft Losses: What Insurance and Other Reimbursements Should Be Included?

When claiming a casualty or theft loss on your federal tax return, it is essential to account for any insurance or other reimbursements you received for the damaged or stolen property. The IRS requires you to reduce your loss by the amount of reimbursement to determine your deductible loss.

What Reimbursements Are Included?

According to IRS guidelines, you must include in your calculation any insurance payments, government disaster relief, or other reimbursements you received for the casualty or theft. This includes:

• Insurance claims paid by your homeowner’s, renter’s, or auto insurance company.
• Government disaster relief payments (e.g., from FEMA or other federal agencies).
• Reimbursements from other sources, such as donations or grants specifically for property replacement.

How to Calculate Your Deductible Loss

The deductible casualty or theft loss is calculated using the following steps:

1. Determine the fair market value (FMV) of the property before the casualty or theft.
2. Determine the FMV after the casualty or theft.
3. Subtract the post-casualty FMV from the pre-casualty FMV to find the decrease in value.
4. Compare this decrease to the original cost or basis of the property and take the smaller amount.
5. Subtract any insurance or other reimbursements received for the loss.

The result is your deductible casualty or theft loss. This calculation is detailed in IRS Publication 584, which provides worksheets and examples for personal-use property.

Important Notes

• You must itemize deductions on Form 1040 to claim casualty losses.
• The total casualty losses must exceed 10% of your adjusted gross income (AGI) to be deductible.
• Each individual casualty or theft loss must exceed $100 before applying the 10% AGI floor.
• Use Form 4684 to report casualty and theft losses. Section A of Form 4684 is used for personal-use property.

For detailed guidance and worksheets, refer to IRS Publication 584, which includes examples for various types of personal property such as furniture, electronics, clothing, and household appliances.

Source:

Publication 584 - Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property)

Form 4684 - Casualties and Thefts

Form 1040-NR Instructions

Publication 15-B - Employer's Tax Guide

Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions. OLT (Online Taxes) provides guidance based on retrieved IRS resources but does not guarantee tax outcomes.