After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. If the loss was to property for your personal use or your family's use, there are two limits on the amount you can deduct for your casualty or theft loss.
- You must reduce each casualty or theft loss by $100 ($100 rule).
- You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule).
You make these reductions on Form 4684.
These rules are explained next and Table 25-1
summarizes how to apply the $100 rule and the 10% rule in various situations. For more detailed explanations and examples, see Publication 547.
When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use part and for the business or income-producing part. You must figure each loss separately because the $100 rule and the 10% rule apply only to the loss on the personal-use part of the property. taxmap/pub17/p17-141.htm#en_us_publink100034289
This rule does not apply if your loss arose in the Kansas disaster area or a Midwestern disaster area (as defined at the beginning of this chapter under What's New for 2008).
After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. This reduction applies to each total casualty or theft loss. It does not matter how many pieces of property are involved in an event. Only a single $100 reduction applies. taxmap/pub17/p17-141.htm#en_us_publink100034290
A hailstorm damages your home and your car. Determine the amount of loss, as discussed earlier, for each of these items. Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100.taxmap/pub17/p17-141.htm#en_us_publink100034291
Generally, events closely related in origin cause a single casualty. It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. taxmap/pub17/p17-141.htm#en_us_publink100034292
This rule does not apply to a loss arising in the Kansas disaster area or a Midwestern disaster area (defined at the beginning of this chapter under What's New for 2008, or a net disaster loss attributable to a federally declared disaster.
You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Apply this rule after you reduce each loss by $100. If you have both gains and losses from casualties or thefts, see Gains and losses,
later in this discussion.
In June, you discovered that your house had been burglarized. Your loss after insurance reimbursement was $2,000. Your adjusted gross income for the year you discovered the theft is $29,500. You first apply the $100 rule and then the 10% rule. Figure your theft loss deduction as follows.
|1)||Loss after insurance||$2,000|
|3)||Loss after $100 rule||$1,900|
|4)||Subtract 10% × $29,500 AGI||2,950|
|5)||Theft loss deduction ||–0–|
You do not have a theft loss deduction because your loss after you apply the $100 rule ($1,900) is less than 10% of your adjusted gross income ($2,950).taxmap/pub17/p17-141.htm#en_us_publink100034294
In March, you had a car accident that totally destroyed your car. You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Your loss on the car was $1,200. In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. Your loss on the basement items after reimbursement was $1,700. Your adjusted gross income for the year that the accident and fire occurred is $25,000. You figure your casualty loss deduction as follows.
| || || ||Base-|
| || ||Car ||ment |
|2)||Subtract $100 per incident||100||100|
|3)||Loss after $100 rule||$1,100||$1,600|
|5)||Subtract 10% × $25,000 AGI||2,500|
|6)||Casualty loss deduction ||$200|
If you had both gains and losses from casualties or thefts to personal-use property, you must compare your total gains to your total losses. Do this after you have reduced each loss by any reimbursements and by $100, but before you have reduced the losses by 10% of your adjusted gross income.
Casualty or theft gains do not include gains you choose to postpone. See Publication 547 for information on the postponement of gain.
If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. The rest, if any, is your deductible loss. taxmap/pub17/p17-141.htm#en_us_publink100034298
If your recognized gains are more than your losses, subtract your losses from your gains. The difference is treated as capital gain and must be reported on Schedule D (Form 1040). The 10% rule does not apply to your gains.