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H&r Block Taxes Online

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H&r block taxes online 25. H&r block taxes online   Nonbusiness Casualty and Theft Losses Table of Contents What's New Introduction Useful Items - You may want to see: CasualtyFamily pet. H&r block taxes online Progressive deterioration. H&r block taxes online Damage from corrosive drywall. H&r block taxes online Theft Loss on Deposits Proof of Loss Figuring a LossDecrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Single Casualty on Multiple Properties Deduction Limits$100 Rule 10% Rule When To Report Gains and LossesDisaster Area Loss How To Report Gains and Losses What's New New Section C of Form 4684 for Ponzi-type investment schemes. H&r block taxes online  Section C of Form 4684 is new for 2013. H&r block taxes online You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. H&r block taxes online Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. H&r block taxes online You do not need to complete Appendix A. H&r block taxes online For details, see Losses from Ponzi-type investment schemes , in this chapter. H&r block taxes online Introduction This chapter explains the tax treatment of personal (not business or investment related) casualty losses, theft losses, and losses on deposits. H&r block taxes online The chapter also explains the following  topics. H&r block taxes online How to figure the amount of your loss. H&r block taxes online How to treat insurance and other reimbursements you receive. H&r block taxes online The deduction limits. H&r block taxes online When and how to report a casualty or theft. H&r block taxes online Forms to file. H&r block taxes online    When you have a casualty or theft, you have to file Form 4684. H&r block taxes online You will also have to file one or more of the following forms. H&r block taxes online Schedule A (Form 1040), Itemized Deductions Schedule D (Form 1040), Capital Gains and Losses Condemnations. H&r block taxes online   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Disposition of Assets. H&r block taxes online Workbook for casualties and thefts. H&r block taxes online    Publication 584 is available to help you make a list of your stolen or damaged personal-use property and figure your loss. H&r block taxes online It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. H&r block taxes online Business or investment-related losses. H&r block taxes online   For information on a casualty or theft loss of business or income-producing property, see Publication 547, Casualties, Disasters, and Thefts. H&r block taxes online Useful Items - You may want to see: Publication 544 Sales and Other Dispositions  of Assets 547 Casualties, Disasters, and   Thefts 584 Casualty, Disaster, and Theft   Loss Workbook (Personal-Use  Property) Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. H&r block taxes online A sudden event is one that is swift, not gradual or progressive. H&r block taxes online An unexpected event is one that is ordinarily unanticipated and unintended. H&r block taxes online An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. H&r block taxes online Deductible losses. H&r block taxes online   Deductible casualty losses can result from a number of different causes, including the following. H&r block taxes online Car accidents (but see Nondeductible losses , next, for exceptions). H&r block taxes online Earthquakes. H&r block taxes online Fires (but see Nondeductible losses , next, for exceptions). H&r block taxes online Floods. H&r block taxes online Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses in Publication 547. H&r block taxes online Mine cave-ins. H&r block taxes online Shipwrecks. H&r block taxes online Sonic booms. H&r block taxes online Storms, including hurricanes and tornadoes. H&r block taxes online Terrorist attacks. H&r block taxes online Vandalism. H&r block taxes online Volcanic eruptions. H&r block taxes online Nondeductible losses. H&r block taxes online   A casualty loss is not deductible if the damage or destruction is caused by the following. H&r block taxes online Accidentally breaking articles such as glassware or china under normal conditions. H&r block taxes online A family pet (explained below). H&r block taxes online A fire if you willfully set it or pay someone else to set it. H&r block taxes online A car accident if your willful negligence or willful act caused it. H&r block taxes online The same is true if the willful act or willful negligence of someone acting for you caused the accident. H&r block taxes online Progressive deterioration (explained later). H&r block taxes online Family pet. H&r block taxes online   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. H&r block taxes online Example. H&r block taxes online Your antique oriental rug was damaged by your new puppy before it was housebroken. H&r block taxes online Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. H&r block taxes online Progressive deterioration. H&r block taxes online    Loss of property due to progressive deterioration is not deductible as a casualty loss. H&r block taxes online This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. H&r block taxes online The following are examples of damage due to progressive deterioration. H&r block taxes online The steady weakening of a building due to normal wind and weather conditions. H&r block taxes online The deterioration and damage to a water heater that bursts. H&r block taxes online However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. H&r block taxes online Most losses of property caused by droughts. H&r block taxes online To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. H&r block taxes online Termite or moth damage. H&r block taxes online The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. H&r block taxes online However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. H&r block taxes online Damage from corrosive drywall. H&r block taxes online   Under a special procedure, you may be able to claim a casualty loss deduction for amounts you paid to repair damage to your home and household appliances that resulted from corrosive drywall. H&r block taxes online For details, see Publication 547. H&r block taxes online Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. H&r block taxes online The taking of property must be illegal under the laws of the state where it occurred and it must have been done with criminal intent. H&r block taxes online You do not need to show a conviction for theft. H&r block taxes online Theft includes the taking of money or property by the following means. H&r block taxes online Blackmail. H&r block taxes online Burglary. H&r block taxes online Embezzlement. H&r block taxes online Extortion. H&r block taxes online Kidnapping for ransom. H&r block taxes online Larceny. H&r block taxes online Robbery. H&r block taxes online The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. H&r block taxes online Decline in market value of stock. H&r block taxes online   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. H&r block taxes online However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. H&r block taxes online You report a capital loss on Schedule D (Form 1040). H&r block taxes online For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. H&r block taxes online Mislaid or lost property. H&r block taxes online   The simple disappearance of money or property is not a theft. H&r block taxes online However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. H&r block taxes online Sudden, unexpected, and unusual events are defined earlier. H&r block taxes online Example. H&r block taxes online A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. H&r block taxes online The diamond falls from the ring and is never found. H&r block taxes online The loss of the diamond is a casualty. H&r block taxes online Losses from Ponzi-type investment schemes. H&r block taxes online   If you had a loss from a Ponzi-type investment scheme, see: Revenue Ruling 2009-9, 2009-14 I. H&r block taxes online R. H&r block taxes online B. H&r block taxes online 735 (available at www. H&r block taxes online irs. H&r block taxes online gov/irb/2009-14_IRB/ar07. H&r block taxes online html). H&r block taxes online Revenue Procedure 2009-20, 2009-14 I. H&r block taxes online R. H&r block taxes online B. H&r block taxes online 749 (available at www. H&r block taxes online irs. H&r block taxes online gov/irb/2009-14_IRB/ar11. H&r block taxes online html). H&r block taxes online Revenue Procedure 2011-58, 2011-50 I. H&r block taxes online R. H&r block taxes online B. H&r block taxes online 849 (available at www. H&r block taxes online irs. H&r block taxes online gov/irb/2011-50_IRB/ar11. H&r block taxes online html). H&r block taxes online If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. H&r block taxes online Skip lines 19 to 27. H&r block taxes online Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. H&r block taxes online You do not need to complete Appendix A. H&r block taxes online For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. H&r block taxes online   If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. H&r block taxes online Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. H&r block taxes online If you incurred this type of loss, you can choose one of the following ways to deduct the loss. H&r block taxes online As a casualty loss. H&r block taxes online As an ordinary loss. H&r block taxes online As a nonbusiness bad debt. H&r block taxes online Casualty loss or ordinary loss. H&r block taxes online   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. H&r block taxes online The choice is generally made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. H&r block taxes online If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. H&r block taxes online However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. H&r block taxes online Once you make this choice, you cannot change it without permission from the Internal Revenue Service. H&r block taxes online   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. H&r block taxes online The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. H&r block taxes online Your loss is subject to the 2%-of-adjusted-gross-income limit. H&r block taxes online You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. H&r block taxes online Nonbusiness bad debt. H&r block taxes online   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. H&r block taxes online How to report. H&r block taxes online   The kind of deduction you choose for your loss on deposits determines how you report your loss. H&r block taxes online If you choose: Casualty loss — report it on Form 4684 first and then on Schedule A (Form 1040). H&r block taxes online Ordinary loss — report it on Schedule A (Form 1040) as a miscellaneous itemized deduction. H&r block taxes online Nonbusiness bad debt — report it on Form 8949 first and then on Schedule D (Form 1040). H&r block taxes online More information. H&r block taxes online   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684 or Deposit in Insolvent or Bankrupt Financial Institution in Publication 550. H&r block taxes online Proof of Loss To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. H&r block taxes online You also must be able to support the amount you take as a deduction. H&r block taxes online Casualty loss proof. H&r block taxes online   For a casualty loss, your records should show all the following. H&r block taxes online The type of casualty (car accident, fire, storm, etc. H&r block taxes online ) and when it occurred. H&r block taxes online That the loss was a direct result of the casualty. H&r block taxes online That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage. H&r block taxes online Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. H&r block taxes online Theft loss proof. H&r block taxes online   For a theft loss, your records should show all the following. H&r block taxes online When you discovered that your property was missing. H&r block taxes online That your property was stolen. H&r block taxes online That you were the owner of the property. H&r block taxes online Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. H&r block taxes online It is important that you have records that will prove your deduction. H&r block taxes online If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. H&r block taxes online Figuring a Loss Figure the amount of your loss using the following steps. H&r block taxes online Determine your adjusted basis in the property before the casualty or theft. H&r block taxes online Determine the decrease in fair market value of the property as a result of the casualty or theft. H&r block taxes online From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. H&r block taxes online For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. H&r block taxes online Gain from reimbursement. H&r block taxes online   If your reimbursement is more than your adjusted basis in the property, you have a gain. H&r block taxes online This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. H&r block taxes online If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. H&r block taxes online See Publication 547 for more information on how to treat a gain from a reimbursement for a casualty or theft. H&r block taxes online Leased property. H&r block taxes online   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. H&r block taxes online Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. H&r block taxes online The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. H&r block taxes online FMV of stolen property. H&r block taxes online   The FMV of property immediately after a theft is considered to be zero, since you no longer have the property. H&r block taxes online Example. H&r block taxes online Several years ago, you purchased silver dollars at face value for $150. H&r block taxes online This is your adjusted basis in the property. H&r block taxes online Your silver dollars were stolen this year. H&r block taxes online The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. H&r block taxes online Your theft loss is $150. H&r block taxes online Recovered stolen property. H&r block taxes online   Recovered stolen property is your property that was stolen and later returned to you. H&r block taxes online If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. H&r block taxes online Use this amount to refigure your total loss for the year in which the loss was deducted. H&r block taxes online   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. H&r block taxes online But report the difference only up to the amount of the loss that reduced your tax. H&r block taxes online For more information on the amount to report, see Recoveries in chapter 12. H&r block taxes online Figuring Decrease in FMV— Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. H&r block taxes online However, other measures can also be used to establish certain decreases. H&r block taxes online Appraisal. H&r block taxes online   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. H&r block taxes online The appraiser must recognize the effects of any general market decline that may occur along with the casualty. H&r block taxes online This information is needed to limit any deduction to the actual loss resulting from damage to the property. H&r block taxes online   Several factors are important in evaluating the accuracy of an appraisal, including the following. H&r block taxes online The appraiser's familiarity with your property before and after the casualty or theft. H&r block taxes online The appraiser's knowledge of sales of comparable property in the area. H&r block taxes online The appraiser's knowledge of conditions in the area of the casualty. H&r block taxes online The appraiser's method of appraisal. H&r block taxes online    You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. H&r block taxes online For more information on disasters, see Disaster Area Losses, in Pub. H&r block taxes online 547. H&r block taxes online Cost of cleaning up or making repairs. H&r block taxes online   The cost of repairing damaged property is not part of a casualty loss. H&r block taxes online Neither is the cost of cleaning up after a casualty. H&r block taxes online But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. H&r block taxes online The repairs are actually made. H&r block taxes online The repairs are necessary to bring the property back to its condition before the casualty. H&r block taxes online The amount spent for repairs is not excessive. H&r block taxes online The repairs take care of the damage only. H&r block taxes online The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. H&r block taxes online Landscaping. H&r block taxes online   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. H&r block taxes online You may be able to measure your loss by what you spend on the following. H&r block taxes online Removing destroyed or damaged trees and shrubs minus any salvage you receive. H&r block taxes online Pruning and other measures taken to preserve damaged trees and shrubs. H&r block taxes online Replanting necessary to restore the property to its approximate value before the casualty. H&r block taxes online Car value. H&r block taxes online    Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. H&r block taxes online You can use the book's retail values and modify them by such factors as mileage and the condition of your car to figure its value. H&r block taxes online The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. H&r block taxes online If your car is not listed in the books, determine its value from other sources. H&r block taxes online A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. H&r block taxes online Figuring Decrease in FMV— Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. H&r block taxes online Cost of protection. H&r block taxes online   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. H&r block taxes online The amount you spend on insurance or to board up your house against a storm is not part of your loss. H&r block taxes online   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. H&r block taxes online An example would be the cost of a dike to prevent flooding. H&r block taxes online Exception. H&r block taxes online   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments. H&r block taxes online See Disaster Area Losses in Publication 547. H&r block taxes online Incidental expenses. H&r block taxes online   Any incidental expenses you have due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. H&r block taxes online Replacement cost. H&r block taxes online   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. H&r block taxes online Sentimental value. H&r block taxes online   Do not consider sentimental value when determining your loss. H&r block taxes online If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. H&r block taxes online Decline in market value of property in or near casualty area. H&r block taxes online   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. H&r block taxes online You have a loss only for actual casualty damage to your property. H&r block taxes online However, if your home is in a federally declared disaster area, see Disaster Area Losses in Publication 547. H&r block taxes online Costs of photographs and appraisals. H&r block taxes online    Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. H&r block taxes online Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. H&r block taxes online    Appraisals are used to figure the decrease in FMV because of a casualty or theft. H&r block taxes online See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. H&r block taxes online   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. H&r block taxes online You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). H&r block taxes online For information about miscellaneous deductions, see chapter 28. H&r block taxes online Adjusted Basis Adjusted basis is your basis in the property (usually cost) increased or decreased by various events, such as improvements and casualty losses. H&r block taxes online For more information, see chapter 13. H&r block taxes online Insurance and Other Reimbursements If you receive an insurance payment or other type of reimbursement, you must subtract the reimbursement when you figure your loss. H&r block taxes online You do not have a casualty or theft loss to the extent you are reimbursed. H&r block taxes online If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. H&r block taxes online You must reduce your loss even if you do not receive payment until a later tax year. H&r block taxes online See Reimbursement Received After Deducting Loss , later. H&r block taxes online Failure to file a claim for reimbursement. H&r block taxes online   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. H&r block taxes online Otherwise, you cannot deduct this loss as a casualty or theft loss. H&r block taxes online However, this rule does not apply to the portion of the loss not covered by insurance (for example, a deductible). H&r block taxes online Example. H&r block taxes online You have a car insurance policy with a $1,000 deductible. H&r block taxes online Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the deduction limits discussed later). H&r block taxes online This is true even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. H&r block taxes online Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. H&r block taxes online Other types of reimbursements are discussed next. H&r block taxes online Also see the Instructions for Form 4684. H&r block taxes online Employer's emergency disaster fund. H&r block taxes online   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. H&r block taxes online Take into consideration only the amount you used to replace your destroyed or damaged property. H&r block taxes online Example. H&r block taxes online Your home was extensively damaged by a tornado. H&r block taxes online Your loss after reimbursement from your insurance company was $10,000. H&r block taxes online Your employer set up a disaster relief fund for its employees. H&r block taxes online Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. H&r block taxes online You received $4,000 from the fund and spent the entire amount on repairs to your home. H&r block taxes online In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. H&r block taxes online Your casualty loss before applying the deduction limits discussed later is $6,000. H&r block taxes online Cash gifts. H&r block taxes online   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. H&r block taxes online This applies even if you use the money to pay for repairs to property damaged in the disaster. H&r block taxes online Example. H&r block taxes online Your home was damaged by a hurricane. H&r block taxes online Relatives and neighbors made cash gifts to you that were excludable from your income. H&r block taxes online You used part of the cash gifts to pay for repairs to your home. H&r block taxes online There were no limits or restrictions on how you could use the cash gifts. H&r block taxes online Because it was an excludable gift, the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. H&r block taxes online Insurance payments for living expenses. H&r block taxes online   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. H&r block taxes online You lose the use of your main home because of a casualty. H&r block taxes online Government authorities do not allow you access to your main home because of a casualty or threat of one. H&r block taxes online Inclusion in income. H&r block taxes online   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. H&r block taxes online Report this amount on Form 1040, line 21. H&r block taxes online However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. H&r block taxes online See Qualified disaster relief payments, under Disaster Area Losses in Publication 547. H&r block taxes online   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. H&r block taxes online Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. H&r block taxes online Generally, these expenses include the amounts you pay for the following. H&r block taxes online Rent for suitable housing. H&r block taxes online Transportation. H&r block taxes online Food. H&r block taxes online Utilities. H&r block taxes online Miscellaneous services. H&r block taxes online Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. H&r block taxes online Example. H&r block taxes online As a result of a fire, you vacated your apartment for a month and moved to a motel. H&r block taxes online You normally pay $525 a month for rent. H&r block taxes online None was charged for the month the apartment was vacated. H&r block taxes online Your motel rent for this month was $1,200. H&r block taxes online You normally pay $200 a month for food. H&r block taxes online Your food expenses for the month you lived in the motel were $400. H&r block taxes online You received $1,100 from your insurance company to cover your living expenses. H&r block taxes online You determine the payment you must include in income as follows. H&r block taxes online 1) Insurance payment for living expenses $1,100 2) Actual expenses during the month you are unable to use your home because of fire 1,600   3) Normal living expenses 725   4) Temporary increase in living  expenses: Subtract line 3 from line 2 875 5) Amount of payment includible  in income: Subtract line 4  from line 1 $ 225 Tax year of inclusion. H&r block taxes online   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. H&r block taxes online Example. H&r block taxes online Your main home was destroyed by a tornado in August 2011. H&r block taxes online You regained use of your home in November 2012. H&r block taxes online The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. H&r block taxes online You include this amount in income on your 2012 Form 1040. H&r block taxes online If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. H&r block taxes online Disaster relief. H&r block taxes online   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss unless they are replacements for lost or destroyed property. H&r block taxes online Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster are not taxable income to you. H&r block taxes online For more information, see Disaster Area Losses in Publication 547. H&r block taxes online Disaster unemployment assistance payments are unemployment benefits that are taxable. H&r block taxes online Generally, disaster relief grants and qualified disaster mitigation payments made under the Robert T. H&r block taxes online Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not includible in your income. H&r block taxes online See Disaster Area Losses in Publication 547. H&r block taxes online Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you receive your actual reimbursement. H&r block taxes online This section explains the adjustment you may have to make. H&r block taxes online Actual reimbursement less than expected. H&r block taxes online   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. H&r block taxes online Example. H&r block taxes online Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2012. H&r block taxes online The accident was due to the negligence of the other driver. H&r block taxes online At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. H&r block taxes online You did not have a deductible loss in 2012. H&r block taxes online In January 2013, the court awarded you a judgment of $2,000. H&r block taxes online However, in July it became apparent that you will be unable to collect any amount from the other driver. H&r block taxes online You can deduct the loss in 2013 subject to the limits discussed later. H&r block taxes online Actual reimbursement more than expected. H&r block taxes online   If you later receive more reimbursement than you expected after you claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. H&r block taxes online However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. H&r block taxes online You do not refigure your tax for the year you claimed the deduction. H&r block taxes online For more information, see Recoveries in chapter 12. H&r block taxes online If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. H&r block taxes online If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. H&r block taxes online Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. H&r block taxes online See Figuring a Gain in Publication 547 for more information on how to treat a gain from the reimbursement of a casualty or theft. H&r block taxes online Actual reimbursement same as expected. H&r block taxes online   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. H&r block taxes online Example. H&r block taxes online In December 2013, you had a collision while driving your personal car. H&r block taxes online Repairs to the car cost $950. H&r block taxes online You had $100 deductible collision insurance. H&r block taxes online Your insurance company agreed to reimburse you for the rest of the damage. H&r block taxes online Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. H&r block taxes online Due to the $100 rule (discussed later under Deduction Limits ), you cannot deduct the $100 you paid as the deductible. H&r block taxes online When you receive the $850 from the insurance company in 2014, do not report it as income. H&r block taxes online Single Casualty on Multiple Properties Personal property. H&r block taxes online   Personal property is any property that is not real property. H&r block taxes online If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. H&r block taxes online Then combine these separate losses to figure the total loss from that casualty or theft. H&r block taxes online Example. H&r block taxes online A fire in your home destroyed an upholstered chair, an oriental rug, and an antique table. H&r block taxes online You did not have fire insurance to cover your loss. H&r block taxes online (This was the only casualty or theft you had during the year. H&r block taxes online ) You paid $750 for the chair and you established that it had an FMV of $500 just before the fire. H&r block taxes online The rug cost $3,000 and had an FMV of $2,500 just before the fire. H&r block taxes online You bought the table at an auction for $100 before discovering it was an antique. H&r block taxes online It had been appraised at $900 before the fire. H&r block taxes online You figure your loss on each of these items as follows:     Chair Rug Table 1) Basis (cost) $750 $3,000 $100 2) FMV before fire $500 $2,500 $900 3) FMV after fire –0– –0– –0– 4) Decrease in FMV $500 $2,500 $900 5) Loss (smaller of (1) or  (4)) $500 $2,500 $100           6) Total loss     $3,100 Real property. H&r block taxes online   In figuring a casualty loss on personal-use real property, treat the entire property (including any improvements, such as buildings, trees, and shrubs) as one item. H&r block taxes online Figure the loss using the smaller of the adjusted basis or the decrease in FMV of the entire property. H&r block taxes online Example. H&r block taxes online You bought your home a few years ago. H&r block taxes online You paid $160,000 ($20,000 for the land and $140,000 for the house). H&r block taxes online You also spent $2,000 for landscaping. H&r block taxes online This year a fire destroyed your home. H&r block taxes online The fire also damaged the shrubbery and trees in your yard. H&r block taxes online The fire was your only casualty or theft loss this year. H&r block taxes online Competent appraisers valued the property as a whole at $200,000 before the fire, but only $30,000 after the fire. H&r block taxes online (The loss to your household furnishings is not shown in this example. H&r block taxes online It would be figured separately on each item, as explained earlier under Personal property . H&r block taxes online ) Shortly after the fire, the insurance company paid you $155,000 for the loss. H&r block taxes online You figure your casualty loss as follows: 1) Adjusted basis of the entire property (land, building, and landscaping) $162,000 2) FMV of entire property before fire $200,000 3) FMV of entire property after fire 30,000 4) Decrease in FMV of entire  property $170,000 5) Loss (smaller of (1) or (4)) $162,000 6) Subtract insurance 155,000 7) Amount of loss after reimbursement $7,000 Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. H&r block taxes online 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. H&r block taxes online You must reduce each casualty or theft loss by $100 ($100 rule). H&r block taxes online You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule). H&r block taxes online You make these reductions on Form 4684. H&r block taxes online These rules are explained next and Table 25-1 summarizes how to apply the $100 rule and the 10% rule in various situations. H&r block taxes online For more detailed explanations and examples, see Publication 547. H&r block taxes online Table 25-1. H&r block taxes online How To Apply the Deduction Limits for Personal-Use Property   $100 Rule 10% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. H&r block taxes online Apply this rule after you have figured the amount of your loss. H&r block taxes online You must reduce your total casualty or theft loss by 10% of your adjusted gross income. H&r block taxes online Apply this rule after you reduce each loss by $100 (the $100 rule). H&r block taxes online Single Event Apply this rule only once, even if many pieces of property are affected. H&r block taxes online Apply this rule only once, even if many pieces of property are affected. H&r block taxes online More Than One Event Apply to the loss from each event. H&r block taxes online Apply to the total of all your losses from all events. H&r block taxes online More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) Apply separately to each person. H&r block taxes online Apply separately to each person. H&r block taxes online Married Couple—With Loss From the Same Event Filing Jointly Apply as if you were one person. H&r block taxes online Apply as if you were one person. H&r block taxes online Filing Separately Apply separately to each spouse. H&r block taxes online Apply separately to each spouse. H&r block taxes online More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. H&r block taxes online Apply separately to each owner of jointly owned property. H&r block taxes online Property used partly for business and partly for personal purposes. H&r block taxes online   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. H&r block taxes online 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. H&r block taxes online $100 Rule After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. H&r block taxes online This reduction applies to each total casualty or theft loss. H&r block taxes online It does not matter how many pieces of property are involved in an event. H&r block taxes online Only a single $100 reduction applies. H&r block taxes online Example. H&r block taxes online A hailstorm damages your home and your car. H&r block taxes online Determine the amount of loss, as discussed earlier, for each of these items. H&r block taxes online Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100. H&r block taxes online Single event. H&r block taxes online   Generally, events closely related in origin cause a single casualty. H&r block taxes online 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. H&r block taxes online 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. H&r block taxes online Apply this rule after you reduce each loss by $100. H&r block taxes online For more information, see the Form 4684 instructions. H&r block taxes online If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. H&r block taxes online Example 1. H&r block taxes online In June, you discovered that your house had been burglarized. H&r block taxes online Your loss after insurance reimbursement was $2,000. H&r block taxes online Your adjusted gross income for the year you discovered the theft is $29,500. H&r block taxes online You first apply the $100 rule and then the 10% rule. H&r block taxes online Figure your theft loss deduction as follows. H&r block taxes online 1) Loss after insurance $2,000 2) Subtract $100 100 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). H&r block taxes online Example 2. H&r block taxes online In March, you had a car accident that totally destroyed your car. H&r block taxes online You did not have collision insurance on your car, so you did not receive any insurance reimbursement. H&r block taxes online Your loss on the car was $1,800. H&r block taxes online In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. H&r block taxes online Your loss on the basement items after reimbursement was $2,100. H&r block taxes online Your adjusted gross income for the year that the accident and fire occurred is $25,000. H&r block taxes online You figure your casualty loss deduction as follows. H&r block taxes online       Base-     Car ment 1) Loss $1,800 $2,100 2) Subtract $100 per incident 100 100 3) Loss after $100 rule $1,700 $2,000 4) Total loss $3,700 5) Subtract 10% × $25,000 AGI 2,500 6) Casualty loss deduction $1,200 Gains and losses. H&r block taxes online   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. H&r block taxes online 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. H&r block taxes online Casualty or theft gains do not include gains you choose to postpone. H&r block taxes online See Publication 547 for information on the postponement of gain. H&r block taxes online Losses more than gains. H&r block taxes online   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. H&r block taxes online The rest, if any, is your deductible loss from personal-use property. H&r block taxes online Gains more than losses. H&r block taxes online   If your recognized gains are more than your losses, subtract your losses from your gains. H&r block taxes online The difference is treated as capital gain and must be reported on Schedule D (Form 1040). H&r block taxes online The 10% rule does not apply to your gains. H&r block taxes online When To Report Gains and Losses Gains. H&r block taxes online   If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. H&r block taxes online You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone reporting the gain as explained in Publication 547. H&r block taxes online If you have a loss, see Table 25-2 . H&r block taxes online Table 25-2. H&r block taxes online When To Deduct a Loss IF you have a loss. H&r block taxes online . H&r block taxes online . H&r block taxes online THEN deduct it in the year. H&r block taxes online . H&r block taxes online . H&r block taxes online from a casualty, the loss occurred. H&r block taxes online in a federally declared disaster area, the disaster occurred or the year immediately before the disaster. H&r block taxes online from a theft, the theft was discovered. H&r block taxes online on a deposit treated as a:   • casualty or any ordinary loss, a reasonable estimate can be made. H&r block taxes online • bad debt, deposits are totally worthless. H&r block taxes online Losses. H&r block taxes online   Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. H&r block taxes online This is true even if you do not repair or replace the damaged property until a later year. H&r block taxes online   You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. H&r block taxes online   If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. H&r block taxes online Loss on deposits. H&r block taxes online   If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits , earlier. H&r block taxes online Disaster Area Loss You generally must deduct a casualty loss in the year it occurred. H&r block taxes online However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct the loss on your tax return or amended return for either of the following years. H&r block taxes online The year the disaster occurred. H&r block taxes online The year immediately preceding the year the disaster occurred. H&r block taxes online Gains. H&r block taxes online    Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. H&r block taxes online For those special rules, see Publication 547. H&r block taxes online Postponed tax deadlines. H&r block taxes online   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. H&r block taxes online The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. H&r block taxes online   If any tax deadline is postponed, the IRS will publicize the postponement in your area by publishing a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). H&r block taxes online Go to www. H&r block taxes online irs. H&r block taxes online gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. H&r block taxes online Who is eligible. H&r block taxes online   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. H&r block taxes online Any individual whose main home is located in a covered disaster area (defined next). H&r block taxes online Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. H&r block taxes online Any individual who is a relief worker affiliated with a recognized government or philanthropic organization who is assisting in a covered disaster area. H&r block taxes online Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. H&r block taxes online The main home or principal place of business does not have to be located in the covered disaster area. H&r block taxes online Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. H&r block taxes online The spouse on a joint return with a taxpayer who is eligible for postponements. H&r block taxes online Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area. H&r block taxes online Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. H&r block taxes online Any other person determined by the IRS to be affected by a federally declared disaster. H&r block taxes online Covered disaster area. H&r block taxes online   This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. H&r block taxes online Abatement of interest and penalties. H&r block taxes online   The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. H&r block taxes online More information. H&r block taxes online   For more information, see Disaster Area Losses in Publication 547. H&r block taxes online How To Report Gains and Losses Use Form 4684 to report a gain or a deductible loss from a casualty or theft. H&r block taxes online If you have more than one casualty or theft, use a separate Form 4684 to determine your gain or loss for each event. H&r block taxes online Combine the gains and losses on one Form 4684. H&r block taxes online Follow the form instructions as to which lines to fill out. H&r block taxes online In addition, you must use the appropriate schedule to report a gain or loss. H&r block taxes online The schedule you use depends on whether you have a gain or loss. H&r block taxes online If you have a: Report it on: Gain Schedule D (Form 1040) Loss Schedule A (Form 1040) Adjustments to basis. H&r block taxes online   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive, and by any deductible loss. H&r block taxes online Amounts you spend to restore your property after a casualty increase your adjusted basis. H&r block taxes online See Adjusted Basis in chapter 13 for more information. H&r block taxes online Net operating loss (NOL). H&r block taxes online    If your casualty or theft loss deduction causes your deductions for the year to be more than your income for the year, you may have an NOL. H&r block taxes online You can use an NOL to lower your tax in an earlier year, allowing you to get a refund for tax you have already paid. H&r block taxes online Or, you can use it to lower your tax in a later year. H&r block taxes online You do not have to be in business to have an NOL from a casualty or theft loss. H&r block taxes online For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. H&r block taxes online Prev  Up  Next   Home   More Online Publications