It is not unknown for people to suffer a loss in the form of theft and casualty for their personal properties. If you are one of them, you can claim the same as itemized deduction for your tax returns. To do so, you need to fill up the Form 4684 to understand how much of yours loses you can report and then mention the same in the Schedule A of the Form 1040.
It is important to note that you can claim only for those losses that are not covered or reimbursed by any insurance company. Also, in order to qualify for the deductions, your loss should amount to more than 10% of your adjusted gross income. You cannot claim a deduction otherwise.
Understanding Casualty and Loses
There are various reasons or aspects that can result in damage or destruction or even loss of property. However, not all of them enable you to deductions under the casualty and loss clause. The following are the only conditions in which casualty comes into the picture.
- An event occurs swiftly, as opposed to a progressive event
- Any event that does not occur on a day to day basis
- An event which is unintentional or something that no one anticipates
Apart from the above points, casualty is also considered if you undergo any of the following.
- Natural disasters such as earthquake, flood, volcanic eruptions, hurricanes, tornadoes etc.
- Any form of terrorist attack or vandalism
- Money that you lose if you the financial institution you deposited your money in, goes bankrupt
- Any demolition or relocation initiated by the government if the same is deemed unfit for habitat due to any disaster
- Draught is one of the major reasons behind loss of property, but for you to claim it, you should be involved with any transactions that leads to profit or must have some sort of farming or trading with the property
Though casualty loss covers a lot of ground, there are still a lot of exclusions such as:
- Setting up a fire willingly or asking someone to do it on your behalf
- Damage to trees due to any disease or fungus or pests etc.
- If you break items accidentally
- If the damages occur due to negligence or not taking proper care, like termites or moth
It is important to note that you should reach out to your insurer immediately to claim for those loses you underwent, if the property is insured.Inability to do so will be a hindrance in your casualty and theft loses claim. But if the loses are not covered as part of the insurance, then you can claim the same.
If the intent of any action is to reduce the property of an individual by removing or taking away money or some portion of the property, it is theft. For the same to qualify as theft it must be done with a criminal intent and must be illegal as per the local laws. The most common forms of theft are as follows:
- Blackmailing someone
- Breaking into someone’s house and carrying out a burglary
- Any form of fraud or denote facts wrongly
- Any robbery on the property
- Kidnapping someone and asking for ransom
- Extorting an individual
- Misuse of the property or portions of it
If you have been subject to any of the above, you first need to check the adjusted basis of your property before any of these events took place. Post that, you need to figure out what has been the change in your property value due to these actions and deduct the same from the insurance amount;you can claim the remaining amount.
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