Casualty And Theft Losses
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Definition of 'Casualty And Theft Losses'Deductible losses stemming from the loss or destruction of the taxpayer's personal property. In order to be deductible, casualty losses must result from a sudden and unforseeable event, such as fire or earthquake. Theft losses generally require proof that the property was actually stolen and not just lost or missing. |
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Investopedia explains 'Casualty And Theft Losses'Casualty and theft losses are reported under the casualty loss section on Schedule A of Form 1040. They are subject to a 10% adjusted gross income (AGI) threshold limitation as well as a $100 reduction per loss. The taxpayer must be able to itemize deductions in order to claim any personal losses.Example: Jim lost his car and some jewelery as a result of theft. The car's fair market value was $7,500 and the jewelry was worth $1,800. His AGI for the year was $38,000. Assuming that Carl itemizes deductions, he can deduct any loss amount above $3,800 (10% of AGI). Therefore he can report a total loss as follows: $7,500 + $1,800 = $9,300 loss $9,300 - $100 - $100 = $9,100 ($100 reduction for each loss) $9,100 - $3,800 = $5,300 deductible loss to be reported on Schedule A Finally, losses that have been reimbursed by insurance are disallowed. Claims that are paid in a later year for losses that were deducted in a previous year must be counted as income. |
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