Claims Ranging From Flooding to Theft May Qualify For Deduction
An often-overlooked deduction may help turn a major property-casualty loss into a tax time gain. The U.S. tax code allows unreimbursed casualty and theft losses to be included among itemized deductions.
To qualify for the deduction, unreimbursed financial claims usually need to be substantial. Any significant catastrophe deductible or gap in insurance coverage -- from fire, flooding or earthquake, for example -- may qualify for tax deductions. Insured losses may range from wildfire damage to claims from theft, vandalism or robbery, and include damage to vehicles.
Generally, an unreimbursed loss can be deducted to the extent it exceeds 10 percent of a homeowner’s adjusted gross income, less $100. If a property is used in a trade or business, slightly different rules may apply, so it’s important to seek assistance from a qualified tax preparer.
Homeowners who feel they qualify for these deductions should collect all receipts, insurance statements, any available police reports or other documentation, and present it to a tax preparer. You can also review the “Non-Business Casualty and Theft Losses” section of the Internal Revenue Service Web site at http://www.irs.gov/taxtopics/tc515.html and consult the Franchise Tax Bureau Web site at http://www.ftb.ca.gov to learn more about both federal and state guidelines for this deduction.
In regions of federally declared disasters, the deduction can either be filed for the year in which the disaster occurred or for the year immediately preceding the year the disaster occurred.
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