15 Aug STOLEN! Can I Deduct it? Category: Deductions
Consider: Your home was broken into and your spouse’s $10,000 in jewelry is taken.
Consider: Your uninsured boat is taken from your cabin dock, along with fishing poles, fishing gear, and your lucky lure.
Can you deduct these loses on your tax return?
Perhaps, but it is tough.
The casualty and theft deduction
There is a provision in the tax code to account for losses due to disasters, theft, and other casualty losses. It is taken as an itemized deduction on your tax return. But there are limits.
- Each loss is subject to a $100 deduction.
- Your losses must exceed 10% of your Adjusted Gross Income before they can reduce your taxable income.
- Your losses are net of any reimbursement for insurance or other funds received.
- Theft related to your home, household items and vehicles are generally covered as qualified theft.
- Since the market value of an item right after it is stolen is zero, the amount you can take as a deduction is generally your basis (usually cost) of the item.
Some hints
Theft. Really? Be prepared to prove your property was stolen. As soon as it is discovered missing, file appropriate reports with the authorities.
Valuation. Keep files of receipts for items of value. This will help prove your basis in the items stolen.
Investment schemes. Special rules apply if you are a victim of a Ponzi Scheme. If you think this applies to you, ask for assistance.
File timely reimbursement. If you think you can get reimbursement from an insurance policy, it is important to file your claim on a timely basis. You may need to prove your claim was denied or show the amount of reimbursement.
So while most theft will not meet an income threshold for deduction, you should be prepared to make the claim if it happens to you.