Losses You Can Claim - Casualty, Disaster, and Theft

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The property you own may be subject to certain types of losses during a tax year that you can use to deduct from your income. These include casualty and theft losses that cause damage to your house, your personal property, and even your vehicles. Losses of this type can only be used to reduce your income if you have no insurance coverage for those losses.

Casualty Losses

The term “casualty loss” may be confusing to some, but the definition is not that complicated. Very simply, a casualty loss is any type of loss or damage that causes you to incur some type of financial loss. This typically means a sudden or fortuitous loss as opposed to gradual deterioration or wear and tear. Examples of casualty losses include damage from a fire, windstorm, floods, hurricanes, or even damage from a volcanic eruption.

Theft Losses

Theft is a more commonly understood term, and as most people know, when someone takes something from another person without permission it is generally construed as theft. More specifically, it is the taking and removal of money or property with the intent to deprive the owner of it. In order for this type of loss to be deductible for tax purposes, the taking must be illegal.

How Much Can You Claim?

To determine the value of your loss, you must consider whether the property was destroyed. If so, then the value that you can claim as a deduction will be the cost to replace the damaged item, less depreciation and salvage value.

For items that are partially damaged or repairable, the amount of your loss will be considered 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
  • The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero.
When Can You Claim The Loss?

With some exceptions, casualty losses can only be claimed in the tax year that the loss occurred. Theft losses can be claimed in the tax year in which the loss was discovered.

While the rules regarding uninsured casualty and theft losses have many finer points, the basic concept is simple. If you have financial loss due to a casualty or theft, you may use this loss to reduce your taxable income.

If you are unsure if a loss you sustained over the last tax year will allow you to reduce your taxable income, be sure to contact the friendly and professional staff at IRefund.com. Our tax experts can provide you with the guidance you need and answer any questions you may have regarding uninsured casualty and theft losses.

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