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.

BREAKING DOWN '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.

RELATED TERMS
  1. Form 4684: Casualties And Thefts

    A tax form distributed by the Internal Revenue Service (IRS) ...
  2. Schedule A

    Schedule A is a U.S. income tax form that is used by taxpayers ...
  3. Tax Deduction

    A deduction from gross income that arises due to various types ...
  4. Standard Deduction

    A base amount of income that is not subject to tax and that can ...
  5. Above The Line Deduction

    Above the line deductions are certain types of deductions that ...
  6. Ordinary Loss

    Any loss incurred by a taxpayer that is not considered a capital ...
Related Articles
  1. Insurance

    Deducting Disaster: Casualty And Theft Losses

    If you've been a victim, your losses may be deductible. Find out how.
  2. Taxes

    An Overview of Itemized Deductions

    Not taking the standard deduction this year could save you hundreds of dollars.
  3. Taxes

    Cut Taxes By Reporting Property Damage

    Know the options you have for your insured property if and when a disaster strikes.
  4. Taxes

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  5. Personal Finance

    11 Tax Deductions You Can't Actually Write Off

    These are some of the most common tax write-offs that you can't really claim.
  6. Taxes

    What is Adjusted Gross Income?

    Adjusted gross income (AGI) is a term from the Internal Revenue Code. AGI is used to determine a person’s income taxes due.
  7. Taxes

    Want A Bigger Tax Refund? Don't Itemize

    Six reasons why many taxpayers can save money and time by claiming the standard deduction.
  8. Taxes

    Here's How to Deduct Your Stock Losses From Your Tax Bill

    Learn the proper procedure for deducting stock investing losses, and get some tips on how to strategically take losses to lower your income tax bill.
  9. Retirement

    Top Tax Tips for Retirees

    Filing your taxes during retirement can be just as time consuming as when you were employed. We have some tips to help you out.
  10. Tech

    Top Tax Tips to Deduct Investment Management Fees

    Investment expenses can be deducted by those who meet three main criteria. Here's what they are and how they work.
RELATED FAQS
  1. What are the deductions taken to determine AGI (adjusted gross income)?

    Read more about the deductions taken to arrive at adjusted gross income, or AGI, including the differences between above ... Read Answer >>
  2. Are mutual fund expense ratios tax deductible?

    Learn under what circumstances mutual fund expense ratios and other investment-related expenses may be tax deductible under ... Read Answer >>
Hot Definitions
  1. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
  2. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate ...
  3. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder ...
  4. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities ...
  6. Wash-Sale Rule

    An Internal Revenue Service (IRS) rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security ...
Trading Center