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H&rblock free online 22. H&rblock free online   Taxes Table of Contents IntroductionIndian tribal government. H&rblock free online Useful Items - You may want to see: Tests To Deduct Any Tax Income TaxesState and Local Income Taxes Foreign Income Taxes General Sales TaxesMotor vehicles. H&rblock free online Real Estate TaxesReal estate taxes for prior years. H&rblock free online Examples. H&rblock free online Form 1099-S. H&rblock free online Real Estate-Related Items You Cannot Deduct Personal Property Taxes Taxes and Fees You Cannot Deduct Where To Deduct Introduction This chapter discusses which taxes you can deduct if you itemize deductions on Schedule A (Form 1040). H&rblock free online It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct. H&rblock free online This chapter covers the following topics. H&rblock free online Income taxes (federal, state, local, and foreign). H&rblock free online General sales taxes (state and local). H&rblock free online Real estate taxes (state, local, and foreign). H&rblock free online Personal property taxes (state and local). H&rblock free online Taxes and fees you cannot deduct. H&rblock free online Use Table 22-1 as a guide to determine which taxes you can deduct. H&rblock free online The end of the chapter contains a section that explains which forms you use to deduct different types of taxes. H&rblock free online Business taxes. H&rblock free online   You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. H&rblock free online For information on these taxes, see Publication 535, Business Expenses. H&rblock free online State or local taxes. H&rblock free online   These are taxes imposed by the 50 states, U. H&rblock free online S. H&rblock free online possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. H&rblock free online Indian tribal government. H&rblock free online   An Indian tribal government recognized by the Secretary of the Treasury as performing substantial government functions will be treated as a state for purposes of claiming a deduction for taxes. H&rblock free online Income taxes, real estate taxes, and personal property taxes imposed by that Indian tribal government (or by any of its subdivisions that are treated as political subdivisions of a state) are deductible. H&rblock free online General sales taxes. H&rblock free online   These are taxes imposed at one rate on retail sales of a broad range of classes of items. H&rblock free online Foreign taxes. H&rblock free online   These are taxes imposed by a foreign country or any of its political subdivisions. H&rblock free online Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 530 Tax Information for Homeowners Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule E (Form 1040) Supplemental Income and Loss 1116 Foreign Tax Credit Tests To Deduct Any Tax The following two tests must be met for you to deduct any tax. H&rblock free online The tax must be imposed on you. H&rblock free online You must pay the tax during your tax year. H&rblock free online The tax must be imposed on you. H&rblock free online   In general, you can deduct only taxes imposed on you. H&rblock free online   Generally, you can deduct property taxes only if you are an owner of the property. H&rblock free online If your spouse owns the property and pays the real estate taxes, the taxes are deductible on your spouse's separate return or on your joint return. H&rblock free online You must pay the tax during your tax year. H&rblock free online   If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. H&rblock free online If you pay your taxes by check, the day you mail or deliver the check is the date of payment, provided the check is honored by the financial institution. H&rblock free online If you use a pay-by-phone account (such as a credit card or electronic funds withdrawal), the date reported on the statement of the financial institution showing when payment was made is the date of payment. H&rblock free online If you contest a tax liability and are a cash basis taxpayer, you can deduct the tax only in the year you actually pay it (or transfer money or other property to provide for satisfaction of the contested liability). H&rblock free online See Publication 538, Accounting Periods and Methods, for details. H&rblock free online    If you use an accrual method of accounting, see Publication 538 for more information. H&rblock free online Income Taxes This section discusses the deductibility of state and local income taxes (including employee contributions to state benefit funds) and foreign income taxes. H&rblock free online State and Local Income Taxes You can deduct state and local income taxes. H&rblock free online However, you can elect to deduct state and local general sales taxes instead of state and local income taxes. H&rblock free online See General Sales Taxes , later. H&rblock free online Exception. H&rblock free online    You cannot deduct state and local income taxes you pay on income that is exempt from federal income tax, unless the exempt income is interest income. H&rblock free online For example, you cannot deduct the part of a state's income tax that is on a cost-of-living allowance exempt from federal income tax. H&rblock free online What To Deduct Your deduction may be for withheld taxes, estimated tax payments, or other tax payments as follows. H&rblock free online Withheld taxes. H&rblock free online   You can deduct state and local income taxes withheld from your salary in the year they are withheld. H&rblock free online Your Form(s) W-2 will show these amounts. H&rblock free online Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. H&rblock free online Estimated tax payments. H&rblock free online   You can deduct estimated tax payments you made during the year to a state or local government. H&rblock free online However, you must have a reasonable basis for making the estimated tax payments. H&rblock free online Any estimated state or local tax payments that are not made in good faith at the time of payment are not deductible. H&rblock free online For example, you made an estimated state income tax payment. H&rblock free online However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. H&rblock free online You had no reasonable basis to believe you had any additional liability for state income taxes and you cannot deduct the estimated tax payment. H&rblock free online Refund applied to taxes. H&rblock free online   You can deduct any part of a refund of prior-year state or local income taxes that you chose to have credited to your 2013 estimated state or local income taxes. H&rblock free online    Do not reduce your deduction by either of the following items. H&rblock free online Any state or local income tax refund (or credit) you expect to receive for 2013. H&rblock free online Any refund of (or credit for) prior-year state and local income taxes you actually received in 2013. H&rblock free online   However, part or all of this refund (or credit) may be taxable. H&rblock free online See Refund (or credit) of state or local income taxes , later. H&rblock free online Separate federal returns. H&rblock free online   If you and your spouse file separate state, local, and federal income tax returns, you each can deduct on your federal return only the amount of your own state and local income tax that you paid during the tax year. H&rblock free online Joint state and local returns. H&rblock free online   If you and your spouse file joint state and local returns and separate federal returns, each of you can deduct on your separate federal return a part of the total state and local income taxes paid during the tax year. H&rblock free online You can deduct only the amount of the total taxes that is proportionate to your gross income compared to the combined gross income of you and your spouse. H&rblock free online However, you cannot deduct more than the amount you actually paid during the year. H&rblock free online You can avoid this calculation if you and your spouse are jointly and individually liable for the full amount of the state and local income taxes. H&rblock free online If so, you and your spouse can deduct on your separate federal returns the amount you each actually paid. H&rblock free online Joint federal return. H&rblock free online   If you file a joint federal return, you can deduct the total of the state and local income taxes both of you paid. H&rblock free online Contributions to state benefit funds. H&rblock free online    As an employee, you can deduct mandatory contributions to state benefit funds withheld from your wages that provide protection against loss of wages. H&rblock free online For example, certain states require employees to make contributions to state funds providing disability or unemployment insurance benefits. H&rblock free online Mandatory payments made to the following state benefit funds are deductible as state income taxes on Schedule A (Form 1040), line 5. H&rblock free online Alaska Unemployment Compensation Fund. H&rblock free online California Nonoccupational Disability Benefit Fund. H&rblock free online New Jersey Nonoccupational Disability Benefit Fund. H&rblock free online New Jersey Unemployment Compensation Fund. H&rblock free online New York Nonoccupational Disability Benefit Fund. H&rblock free online Pennsylvania Unemployment Compensation Fund. H&rblock free online Rhode Island Temporary Disability Benefit Fund. H&rblock free online Washington State Supplemental Workmen's Compensation Fund. H&rblock free online    Employee contributions to private or voluntary disability plans are not deductible. H&rblock free online Refund (or credit) of state or local income taxes. H&rblock free online   If you receive a refund of (or credit for) state or local income taxes in a year after the year in which you paid them, you may have to include the refund in income on Form 1040, line 10, in the year you receive it. H&rblock free online This includes refunds resulting from taxes that were overwithheld, applied from a prior year return, not figured correctly, or figured again because of an amended return. H&rblock free online If you did not itemize your deductions in the previous year, do not include the refund in income. H&rblock free online If you deducted the taxes in the previous year, include all or part of the refund on Form 1040, line 10, in the year you receive the refund. H&rblock free online For a discussion of how much to include, see Recoveries in chapter 12. H&rblock free online Foreign Income Taxes Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. H&rblock free online S. H&rblock free online possession. H&rblock free online However, you cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. H&rblock free online S. H&rblock free online tax under the foreign earned income exclusion or the foreign housing exclusion. H&rblock free online For information on these exclusions, see Publication 54, Tax Guide for U. H&rblock free online S. H&rblock free online Citizens and Resident Aliens Abroad. H&rblock free online For information on the foreign tax credit, see Publication 514. H&rblock free online General Sales Taxes You can elect to deduct state and local general sales taxes, instead of state and local income taxes, as an itemized deduction on Schedule A (Form 1040), line 5b. H&rblock free online You can use either your actual expenses or the state and local sales tax tables to figure your sales tax deduction. H&rblock free online Actual expenses. H&rblock free online   Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) if the tax rate was the same as the general sales tax rate. H&rblock free online However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. H&rblock free online If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. H&rblock free online If you use the actual expenses method, you must have receipts to show the general sales taxes paid. H&rblock free online Do not include sales taxes paid on items used in your trade or business. H&rblock free online Motor vehicles. H&rblock free online   For purposes of this section, motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. H&rblock free online This also includes sales taxes on a leased motor vehicle, but not on vehicles used in your trade or business. H&rblock free online Optional sales tax tables. H&rblock free online   Instead of using your actual expenses, you can figure your state and local general sales tax deduction using the state and local sales tax tables in the Instructions for Schedule A (Form 1040). H&rblock free online You may also be able to add the state and local general sales taxes paid on certain specified items. H&rblock free online   Your applicable table amount is based on the state where you live, your income, and the number of exemptions claimed on your tax return. H&rblock free online Your income is your adjusted gross income plus any nontaxable items such as the following. H&rblock free online Tax-exempt interest. H&rblock free online Veterans' benefits. H&rblock free online Nontaxable combat pay. H&rblock free online Workers' compensation. H&rblock free online Nontaxable part of social security and railroad retirement benefits. H&rblock free online Nontaxable part of IRA, pension, or annuity distributions, excluding rollovers. H&rblock free online Public assistance payments. H&rblock free online If you lived in different states during the same tax year, you must prorate your applicable table amount for each state based on the days you lived in each state. H&rblock free online See the Instructions for Schedule A (Form 1040), line 5, for details. H&rblock free online Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. H&rblock free online You can deduct these taxes only if they are based on the assessed value of the real property and charged uniformly against all property under the jurisdiction of the taxing authority. H&rblock free online Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. H&rblock free online They also do not include itemized charges for services (such as trash collection) assessed against specific property or certain people, even if the charge is paid to the taxing authority. H&rblock free online For more information about taxes and charges that are not deductible, see Real Estate-Related Items You Cannot Deduct , later. H&rblock free online Tenant-shareholders in a cooperative housing corporation. H&rblock free online   Generally, if you are a tenant-stockholder in a cooperative housing corporation, you can deduct the amount paid to the corporation that represents your share of the real estate taxes the corporation paid or incurred for your dwelling unit. H&rblock free online The corporation should provide you with a statement showing your share of the taxes. H&rblock free online For more information, see Special Rules for Cooperatives in Publication 530. H&rblock free online Division of real estate taxes between buyers and sellers. H&rblock free online   If you bought or sold real estate during the year, the real estate taxes must be divided between the buyer and the seller. H&rblock free online   The buyer and the seller must divide the real estate taxes according to the number of days in the real property tax year (the period to which the tax is imposed relates) that each owned the property. H&rblock free online The seller is treated as paying the taxes up to, but not including, the date of sale. H&rblock free online The buyer is treated as paying the taxes beginning with the date of sale. H&rblock free online This applies regardless of the lien dates under local law. H&rblock free online Generally, this information is included on the settlement statement provided at the closing. H&rblock free online    If you (the seller) cannot deduct taxes until they are paid because you use the cash method of accounting, and the buyer of your property is personally liable for the tax, you are considered to have paid your part of the tax at the time of the sale. H&rblock free online This lets you deduct the part of the tax to the date of sale even though you did not actually pay it. H&rblock free online However, you must also include the amount of that tax in the selling price of the property. H&rblock free online The buyer must include the same amount in his or her cost of the property. H&rblock free online   You figure your deduction for taxes on each property bought or sold during the real property tax year as follows. H&rblock free online Worksheet 22-1. H&rblock free online Figuring Your Real Estate Tax Deduction 1. H&rblock free online Enter the total real estate taxes for the real property tax year   2. H&rblock free online Enter the number of days in the real property tax year that you owned the property   3. H&rblock free online Divide line 2 by 365 (for leap years, divide line 2 by 366) . H&rblock free online 4. H&rblock free online Multiply line 1 by line 3. H&rblock free online This is your deduction. H&rblock free online Enter it on Schedule A (Form 1040), line 6   Note. H&rblock free online Repeat steps 1 through 4 for each property you bought or sold during the real property tax year. H&rblock free online Your total deduction is the sum of the line 4 amounts for all of the properties. H&rblock free online Real estate taxes for prior years. H&rblock free online   Do not divide delinquent taxes between the buyer and seller if the taxes are for any real property tax year before the one in which the property is sold. H&rblock free online Even if the buyer agrees to pay the delinquent taxes, the buyer cannot deduct them. H&rblock free online The buyer must add them to the cost of the property. H&rblock free online The seller can deduct these taxes paid by the buyer. H&rblock free online However, the seller must include them in the selling price. H&rblock free online Examples. H&rblock free online   The following examples illustrate how real estate taxes are divided between buyer and seller. H&rblock free online Example 1. H&rblock free online Dennis and Beth White's real property tax year for both their old home and their new home is the calendar year, with payment due August 1. H&rblock free online The tax on their old home, sold on May 7, was $620. H&rblock free online The tax on their new home, bought on May 3, was $732. H&rblock free online Dennis and Beth are considered to have paid a proportionate share of the real estate taxes on the old home even though they did not actually pay them to the taxing authority. H&rblock free online On the other hand, they can claim only a proportionate share of the taxes they paid on their new property even though they paid the entire amount. H&rblock free online Dennis and Beth owned their old home during the real property tax year for 126 days (January 1 to May 6, the day before the sale). H&rblock free online They figure their deduction for taxes on their old home as follows. H&rblock free online Worksheet 22-1. H&rblock free online Figuring Your Real Estate Tax Deduction — Taxes on Old Home 1. H&rblock free online Enter the total real estate taxes for the real property tax year $620 2. H&rblock free online Enter the number of days in the real property tax year that you owned the property 126 3. H&rblock free online Divide line 2 by 365 (for leap years, divide line 2 by 366) . H&rblock free online 3452 4. H&rblock free online Multiply line 1 by line 3. H&rblock free online This is your deduction. H&rblock free online Enter it on Schedule A (Form 1040), line 6 $214 Since the buyers of their old home paid all of the taxes, Dennis and Beth also include the $214 in the selling price of the old home. H&rblock free online (The buyers add the $214 to their cost of the home. H&rblock free online ) Dennis and Beth owned their new home during the real property tax year for 243 days (May 3 to December 31, including their date of purchase). H&rblock free online They figure their deduction for taxes on their new home as follows. H&rblock free online Worksheet 22-1. H&rblock free online Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. H&rblock free online Enter the total real estate taxes for the real property tax year $732 2. H&rblock free online Enter the number of days in the real property tax year that you owned the property 243 3. H&rblock free online Divide line 2 by 365 (for leap years, divide line 2 by 366) . H&rblock free online 6658 4. H&rblock free online Multiply line 1 by line 3. H&rblock free online This is your deduction. H&rblock free online Enter it on Schedule A (Form 1040), line 6 $487 Since Dennis and Beth paid all of the taxes on the new home, they add $245 ($732 paid less $487 deduction) to their cost of the new home. H&rblock free online (The sellers add this $245 to their selling price and deduct the $245 as a real estate tax. H&rblock free online ) Dennis and Beth's real estate tax deduction for their old and new homes is the sum of $214 and $487, or $701. H&rblock free online They will enter this amount on Schedule A (Form 1040), line 6. H&rblock free online Example 2. H&rblock free online George and Helen Brown bought a new home on May 3, 2013. H&rblock free online Their real property tax year for the new home is the calendar year. H&rblock free online Real estate taxes for 2012 were assessed in their state on January 1, 2013. H&rblock free online The taxes became due on May 31, 2013, and October 31, 2013. H&rblock free online The Browns agreed to pay all taxes due after the date of purchase. H&rblock free online Real estate taxes for 2012 were $680. H&rblock free online They paid $340 on May 31, 2013, and $340 on October 31, 2013. H&rblock free online These taxes were for the 2012 real property tax year. H&rblock free online The Browns cannot deduct them since they did not own the property until 2013. H&rblock free online Instead, they must add $680 to the cost of their new home. H&rblock free online In January 2014, the Browns receive their 2013 property tax statement for $752, which they will pay in 2014. H&rblock free online The Browns owned their new home during the 2013 real property tax year for 243 days (May 3 to December 31). H&rblock free online They will figure their 2014 deduction for taxes as follows. H&rblock free online Worksheet 22-1. H&rblock free online Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. H&rblock free online Enter the total real estate taxes for the real property tax year $752 2. H&rblock free online Enter the number of days in the real property tax year that you owned the property 243 3. H&rblock free online Divide line 2 by 365 (for leap years, divide line 2 by 366) . H&rblock free online 6658 4. H&rblock free online Multiply line 1 by line 3. H&rblock free online This is your deduction. H&rblock free online Claim it on Schedule A (Form 1040), line 6 $501 The remaining $251 ($752 paid less $501 deduction) of taxes paid in 2014, along with the $680 paid in 2013, is added to the cost of their new home. H&rblock free online Because the taxes up to the date of sale are considered paid by the seller on the date of sale, the seller is entitled to a 2013 tax deduction of $931. H&rblock free online This is the sum of the $680 for 2012 and the $251 for the 122 days the seller owned the home in 2013. H&rblock free online The seller must also include the $931 in the selling price when he or she figures the gain or loss on the sale. H&rblock free online The seller should contact the Browns in January 2014 to find out how much real estate tax is due for 2013. H&rblock free online Form 1099-S. H&rblock free online   For certain sales or exchanges of real estate, the person responsible for closing the sale (generally the settlement agent) prepares Form 1099-S, Proceeds From Real Estate Transactions, to report certain information to the IRS and to the seller of the property. H&rblock free online Box 2 of Form 1099-S is for the gross proceeds from the sale and should include the portion of the seller's real estate tax liability that the buyer will pay after the date of sale. H&rblock free online The buyer includes these taxes in the cost basis of the property, and the seller both deducts this amount as a tax paid and includes it in the sales price of the property. H&rblock free online   For a real estate transaction that involves a home, any real estate tax the seller paid in advance but that is the liability of the buyer appears on Form 1099-S, box 5. H&rblock free online The buyer deducts this amount as a real estate tax, and the seller reduces his or her real estate tax deduction (or includes it in income) by the same amount. H&rblock free online See Refund (or rebate) , later. H&rblock free online Taxes placed in escrow. H&rblock free online   If your monthly mortgage payment includes an amount placed in escrow (put in the care of a third party) for real estate taxes, you may not be able to deduct the total amount placed in escrow. H&rblock free online You can deduct only the real estate tax that the third party actually paid to the taxing authority. H&rblock free online If the third party does not notify you of the amount of real estate tax that was paid for you, contact the third party or the taxing authority to find the proper amount to show on your return. H&rblock free online Tenants by the entirety. H&rblock free online   If you and your spouse held property as tenants by the entirety and you file separate federal returns, each of you can deduct only the taxes each of you paid on the property. H&rblock free online Divorced individuals. H&rblock free online   If your divorce or separation agreement states that you must pay the real estate taxes for a home owned by you and your spouse, part of your payments may be deductible as alimony and part as real estate taxes. H&rblock free online See Taxes and insurance in chapter 18 for more information. H&rblock free online Ministers' and military housing allowances. H&rblock free online   If you are a minister or a member of the uniformed services and receive a housing allowance that you can exclude from income, you still can deduct all of the real estate taxes you pay on your home. H&rblock free online Refund (or rebate). H&rblock free online   If you received a refund or rebate in 2013 of real estate taxes you paid in 2013, you must reduce your deduction by the amount refunded to you. H&rblock free online If you received a refund or rebate in 2013 of real estate taxes you deducted in an earlier year (either as an itemized deduction or an increase to your standard deduction), you generally must include the refund or rebate in income in the year you receive it. H&rblock free online However, the amount you include in income is limited to the amount of the deduction that reduced your tax in the earlier year. H&rblock free online For more information, see Recoveries in chapter 12. H&rblock free online Table 22-1. H&rblock free online Which Taxes Can You Deduct? Type of Tax You Can Deduct You Cannot Deduct Fees and Charges Fees and charges that are expenses of your trade or business or of producing income. H&rblock free online Fees and charges that are not expenses of your trade or business or of producing income, such as fees for driver's licenses, car inspections, parking, or charges for water bills (see Taxes and Fees You Cannot Deduct ). H&rblock free online     Fines and penalties. H&rblock free online Income Taxes State and local income taxes. H&rblock free online Federal income taxes. H&rblock free online   Foreign income taxes. H&rblock free online     Employee contributions to state funds listed under Contributions to state benefit funds . H&rblock free online Employee contributions to private or voluntary disability plans. H&rblock free online     State and local general sales taxes if you choose to deduct state and local income taxes. H&rblock free online General Sales Taxes State and local general sales taxes, including compensating use taxes. H&rblock free online State and local income taxes if you choose to deduct state and local general sales taxes. H&rblock free online Other Taxes Taxes that are expenses of your trade or business. H&rblock free online Federal excise taxes, such as tax on gasoline, that are not expenses of your trade or business or of producing income. H&rblock free online   Taxes on property producing rent or royalty income. H&rblock free online Per capita taxes. H&rblock free online   Occupational taxes. H&rblock free online See chapter 28. H&rblock free online     One-half of self-employment tax paid. H&rblock free online   Personal Property Taxes State and local personal property taxes. H&rblock free online Customs duties that are not expenses of your trade or business or of producing income. H&rblock free online Real Estate Taxes State and local real estate taxes. H&rblock free online Real estate taxes that are treated as imposed on someone else (see Division of real estate taxes between buyers and sellers ). H&rblock free online   Foreign real estate taxes. H&rblock free online Taxes for local benefits (with exceptions). H&rblock free online See Real Estate-Related Items You Cannot Deduct . H&rblock free online   Tenant's share of real estate taxes paid by  cooperative housing corporation. H&rblock free online Trash and garbage pickup fees (with exceptions). H&rblock free online See Real Estate-Related Items You Cannot Deduct . H&rblock free online     Rent increase due to higher real estate taxes. H&rblock free online     Homeowners' association charges. H&rblock free online Real Estate-Related Items You Cannot Deduct Payments for the following items generally are not deductible as real estate taxes. H&rblock free online Taxes for local benefits. H&rblock free online Itemized charges for services (such as trash and garbage pickup fees). H&rblock free online Transfer taxes (or stamp taxes). H&rblock free online Rent increases due to higher real estate taxes. H&rblock free online Homeowners' association charges. H&rblock free online Taxes for local benefits. H&rblock free online   Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. H&rblock free online These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. H&rblock free online You should increase the basis of your property by the amount of the assessment. H&rblock free online   Local benefit taxes are deductible only if they are for maintenance, repair, or interest charges related to those benefits. H&rblock free online If only a part of the taxes is for maintenance, repair, or interest, you must be able to show the amount of that part to claim the deduction. H&rblock free online If you cannot determine what part of the tax is for maintenance, repair, or interest, none of it is deductible. H&rblock free online    Taxes for local benefits may be included in your real estate tax bill. H&rblock free online If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. H&rblock free online You should use the rules above to determine if the local benefit tax is deductible. H&rblock free online Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. H&rblock free online Itemized charges for services. H&rblock free online    An itemized charge for services assessed against specific property or certain people is not a tax, even if the charge is paid to the taxing authority. H&rblock free online For example, you cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged to each homeowner for trash collection), or A flat fee charged for a single service provided by your government (such as a $30 charge for mowing your lawn because it was allowed to grow higher than permitted under your local ordinance). H&rblock free online    You must look at your real estate tax bill to determine if any nondeductible itemized charges, such as those listed above, are included in the bill. H&rblock free online If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. H&rblock free online Exception. H&rblock free online   Service charges used to maintain or improve services (such as trash collection or police and fire protection) are deductible as real estate taxes if: The fees or charges are imposed at a like rate against all property in the taxing jurisdiction, The funds collected are not earmarked; instead, they are commingled with general revenue funds, and Funds used to maintain or improve services are not limited to or determined by the amount of these fees or charges collected. H&rblock free online Transfer taxes (or stamp taxes). H&rblock free online   Transfer taxes and similar taxes and charges on the sale of a personal home are not deductible. H&rblock free online If they are paid by the seller, they are expenses of the sale and reduce the amount realized on the sale. H&rblock free online If paid by the buyer, they are included in the cost basis of the property. H&rblock free online Rent increase due to higher real estate taxes. H&rblock free online   If your landlord increases your rent in the form of a tax surcharge because of increased real estate taxes, you cannot deduct the increase as taxes. H&rblock free online Homeowners' association charges. H&rblock free online   These charges are not deductible because they are imposed by the homeowners' association, rather than the state or local government. H&rblock free online Personal Property Taxes Personal property tax is deductible if it is a state or local tax that is: Charged on personal property, Based only on the value of the personal property, and Charged on a yearly basis, even if it is collected more or less than once a year. H&rblock free online A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. H&rblock free online For example, a yearly tax based on value qualifies as a personal property tax even if it is called a registration fee and is for the privilege of registering motor vehicles or using them on the highways. H&rblock free online If the tax is partly based on value and partly based on other criteria, it may qualify in part. H&rblock free online Example. H&rblock free online Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. H&rblock free online You paid $32 based on the value ($1,500) and weight (3,400 lbs. H&rblock free online ) of your car. H&rblock free online You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. H&rblock free online The remaining $17 ($. H&rblock free online 50 × 34), based on the weight, is not deductible. H&rblock free online Taxes and Fees You Cannot Deduct Many federal, state, and local government taxes are not deductible because they do not fall within the categories discussed earlier. H&rblock free online Other taxes and fees, such as federal income taxes, are not deductible because the tax law specifically prohibits a deduction for them. H&rblock free online See Table 22-1. H&rblock free online Taxes and fees that are generally not deductible include the following items. H&rblock free online Employment taxes. H&rblock free online This includes social security, Medicare, and railroad retirement taxes withheld from your pay. H&rblock free online However, one-half of self-employment tax you pay is deductible. H&rblock free online In addition, the social security and other employment taxes you pay on the wages of a household worker may be included in medical expenses that you can deduct or child care expenses that allow you to claim the child and dependent care credit. H&rblock free online For more information, see chapters 21 and 32. H&rblock free online Estate, inheritance, legacy, or succession taxes. H&rblock free online However, you can deduct the estate tax attributable to income in respect of a decedent if you, as a beneficiary, must include that income in your gross income. H&rblock free online In that case, deduct the estate tax as a miscellaneous deduction that is not subject to the 2%-of-adjusted-gross-income limit. H&rblock free online For more information, see Publication 559, Survivors, Executors, and Administrators. H&rblock free online Federal income taxes. H&rblock free online This includes income taxes withheld from your pay. H&rblock free online Fines and penalties. H&rblock free online You cannot deduct fines and penalties paid to a government for violation of any law, including related amounts forfeited as collateral deposits. H&rblock free online Gift taxes. H&rblock free online License fees. H&rblock free online You cannot deduct license fees for personal purposes (such as marriage, driver's, and dog license fees). H&rblock free online Per capita taxes. H&rblock free online You cannot deduct state or local per capita taxes. H&rblock free online Many taxes and fees other than those listed above are also nondeductible, unless they are ordinary and necessary expenses of a business or income producing activity. H&rblock free online For other nondeductible items, see Real Estate-Related Items You Cannot Deduct , earlier. H&rblock free online Where To Deduct You deduct taxes on the following schedules. H&rblock free online State and local income taxes. H&rblock free online    These taxes are deducted on Schedule A (Form 1040), line 5, even if your only source of income is from business, rents, or royalties. H&rblock free online Check box a on line 5. H&rblock free online General sales taxes. H&rblock free online   Sales taxes are deducted on Schedule A (Form 1040), line 5. H&rblock free online You must check box b on line 5. H&rblock free online If you elect to deduct sales taxes, you cannot deduct state and local income taxes on Schedule A (Form 1040), line 5, box a. H&rblock free online Foreign income taxes. H&rblock free online   Generally, income taxes you pay to a foreign country or U. H&rblock free online S. H&rblock free online possession can be claimed as an itemized deduction on Schedule A (Form 1040), line 8, or as a credit against your U. H&rblock free online S. H&rblock free online income tax on Form 1040, line 47. H&rblock free online To claim the credit, you may have to complete and attach Form 1116. H&rblock free online For more information, see chapter 37, the Form 1040 instructions, or Publication 514. H&rblock free online Real estate taxes and personal property taxes. H&rblock free online    Real estate and personal property taxes are deducted on Schedule A (Form 1040), lines 6 and 7, respectively, unless they are paid on property used in your business, in which case they are deducted on Schedule C, Schedule C-EZ, or Schedule F (Form 1040). H&rblock free online Taxes on property that produces rent or royalty income are deducted on Schedule E (Form 1040). H&rblock free online Self-employment tax. H&rblock free online    Deduct one-half of your self-employment tax on Form 1040, line 27. H&rblock free online Other taxes. H&rblock free online    All other deductible taxes are deducted on Schedule A (Form 1040), line 8. H&rblock free online Prev  Up  Next   Home   More Online Publications
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H&rblock free online 25. H&rblock free online   Nonbusiness Casualty and Theft Losses Table of Contents What's New Introduction Useful Items - You may want to see: CasualtyFamily pet. H&rblock free online Progressive deterioration. H&rblock free online Damage from corrosive drywall. H&rblock free 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&rblock free online  Section C of Form 4684 is new for 2013. H&rblock free 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&rblock free online Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. H&rblock free online You do not need to complete Appendix A. H&rblock free online For details, see Losses from Ponzi-type investment schemes , in this chapter. H&rblock free online Introduction This chapter explains the tax treatment of personal (not business or investment related) casualty losses, theft losses, and losses on deposits. H&rblock free online The chapter also explains the following  topics. H&rblock free online How to figure the amount of your loss. H&rblock free online How to treat insurance and other reimbursements you receive. H&rblock free online The deduction limits. H&rblock free online When and how to report a casualty or theft. H&rblock free online Forms to file. H&rblock free online    When you have a casualty or theft, you have to file Form 4684. H&rblock free online You will also have to file one or more of the following forms. H&rblock free online Schedule A (Form 1040), Itemized Deductions Schedule D (Form 1040), Capital Gains and Losses Condemnations. H&rblock free online   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Disposition of Assets. H&rblock free online Workbook for casualties and thefts. H&rblock free online    Publication 584 is available to help you make a list of your stolen or damaged personal-use property and figure your loss. H&rblock free online It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. H&rblock free online Business or investment-related losses. H&rblock free online   For information on a casualty or theft loss of business or income-producing property, see Publication 547, Casualties, Disasters, and Thefts. H&rblock free 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&rblock free online A sudden event is one that is swift, not gradual or progressive. H&rblock free online An unexpected event is one that is ordinarily unanticipated and unintended. H&rblock free 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&rblock free online Deductible losses. H&rblock free online   Deductible casualty losses can result from a number of different causes, including the following. H&rblock free online Car accidents (but see Nondeductible losses , next, for exceptions). H&rblock free online Earthquakes. H&rblock free online Fires (but see Nondeductible losses , next, for exceptions). H&rblock free online Floods. H&rblock free 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&rblock free online Mine cave-ins. H&rblock free online Shipwrecks. H&rblock free online Sonic booms. H&rblock free online Storms, including hurricanes and tornadoes. H&rblock free online Terrorist attacks. H&rblock free online Vandalism. H&rblock free online Volcanic eruptions. H&rblock free online Nondeductible losses. H&rblock free online   A casualty loss is not deductible if the damage or destruction is caused by the following. H&rblock free online Accidentally breaking articles such as glassware or china under normal conditions. H&rblock free online A family pet (explained below). H&rblock free online A fire if you willfully set it or pay someone else to set it. H&rblock free online A car accident if your willful negligence or willful act caused it. H&rblock free online The same is true if the willful act or willful negligence of someone acting for you caused the accident. H&rblock free online Progressive deterioration (explained later). H&rblock free online Family pet. H&rblock free 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&rblock free online Example. H&rblock free online Your antique oriental rug was damaged by your new puppy before it was housebroken. H&rblock free online Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. H&rblock free online Progressive deterioration. H&rblock free online    Loss of property due to progressive deterioration is not deductible as a casualty loss. H&rblock free online This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. H&rblock free online The following are examples of damage due to progressive deterioration. H&rblock free online The steady weakening of a building due to normal wind and weather conditions. H&rblock free online The deterioration and damage to a water heater that bursts. H&rblock free 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&rblock free online Most losses of property caused by droughts. H&rblock free 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&rblock free online Termite or moth damage. H&rblock free online The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. H&rblock free online However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. H&rblock free online Damage from corrosive drywall. H&rblock free 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&rblock free online For details, see Publication 547. H&rblock free online Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. H&rblock free 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&rblock free online You do not need to show a conviction for theft. H&rblock free online Theft includes the taking of money or property by the following means. H&rblock free online Blackmail. H&rblock free online Burglary. H&rblock free online Embezzlement. H&rblock free online Extortion. H&rblock free online Kidnapping for ransom. H&rblock free online Larceny. H&rblock free online Robbery. H&rblock free online The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. H&rblock free online Decline in market value of stock. H&rblock free 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&rblock free 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&rblock free online You report a capital loss on Schedule D (Form 1040). H&rblock free online For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. H&rblock free online Mislaid or lost property. H&rblock free online   The simple disappearance of money or property is not a theft. H&rblock free 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&rblock free online Sudden, unexpected, and unusual events are defined earlier. H&rblock free online Example. H&rblock free online A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. H&rblock free online The diamond falls from the ring and is never found. H&rblock free online The loss of the diamond is a casualty. H&rblock free online Losses from Ponzi-type investment schemes. H&rblock free online   If you had a loss from a Ponzi-type investment scheme, see: Revenue Ruling 2009-9, 2009-14 I. H&rblock free online R. H&rblock free online B. H&rblock free online 735 (available at www. H&rblock free online irs. H&rblock free online gov/irb/2009-14_IRB/ar07. H&rblock free online html). H&rblock free online Revenue Procedure 2009-20, 2009-14 I. H&rblock free online R. H&rblock free online B. H&rblock free online 749 (available at www. H&rblock free online irs. H&rblock free online gov/irb/2009-14_IRB/ar11. H&rblock free online html). H&rblock free online Revenue Procedure 2011-58, 2011-50 I. H&rblock free online R. H&rblock free online B. H&rblock free online 849 (available at www. H&rblock free online irs. H&rblock free online gov/irb/2011-50_IRB/ar11. H&rblock free online html). H&rblock free 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&rblock free online Skip lines 19 to 27. H&rblock free online Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. H&rblock free online You do not need to complete Appendix A. H&rblock free online For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. H&rblock free 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&rblock free online Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. H&rblock free online If you incurred this type of loss, you can choose one of the following ways to deduct the loss. H&rblock free online As a casualty loss. H&rblock free online As an ordinary loss. H&rblock free online As a nonbusiness bad debt. H&rblock free online Casualty loss or ordinary loss. H&rblock free 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&rblock free 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&rblock free 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&rblock free 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&rblock free online Once you make this choice, you cannot change it without permission from the Internal Revenue Service. H&rblock free online   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. H&rblock free 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&rblock free online Your loss is subject to the 2%-of-adjusted-gross-income limit. H&rblock free online You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. H&rblock free online Nonbusiness bad debt. H&rblock free 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&rblock free online How to report. H&rblock free online   The kind of deduction you choose for your loss on deposits determines how you report your loss. H&rblock free online If you choose: Casualty loss — report it on Form 4684 first and then on Schedule A (Form 1040). H&rblock free online Ordinary loss — report it on Schedule A (Form 1040) as a miscellaneous itemized deduction. H&rblock free online Nonbusiness bad debt — report it on Form 8949 first and then on Schedule D (Form 1040). H&rblock free online More information. H&rblock free 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&rblock free 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&rblock free online You also must be able to support the amount you take as a deduction. H&rblock free online Casualty loss proof. H&rblock free online   For a casualty loss, your records should show all the following. H&rblock free online The type of casualty (car accident, fire, storm, etc. H&rblock free online ) and when it occurred. H&rblock free online That the loss was a direct result of the casualty. H&rblock free 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&rblock free online Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. H&rblock free online Theft loss proof. H&rblock free online   For a theft loss, your records should show all the following. H&rblock free online When you discovered that your property was missing. H&rblock free online That your property was stolen. H&rblock free online That you were the owner of the property. H&rblock free online Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. H&rblock free online It is important that you have records that will prove your deduction. H&rblock free online If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. H&rblock free online Figuring a Loss Figure the amount of your loss using the following steps. H&rblock free online Determine your adjusted basis in the property before the casualty or theft. H&rblock free online Determine the decrease in fair market value of the property as a result of the casualty or theft. H&rblock free 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&rblock free 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&rblock free online Gain from reimbursement. H&rblock free online   If your reimbursement is more than your adjusted basis in the property, you have a gain. H&rblock free online This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. H&rblock free 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&rblock free online See Publication 547 for more information on how to treat a gain from a reimbursement for a casualty or theft. H&rblock free online Leased property. H&rblock free 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&rblock free 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&rblock free 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&rblock free online FMV of stolen property. H&rblock free online   The FMV of property immediately after a theft is considered to be zero, since you no longer have the property. H&rblock free online Example. H&rblock free online Several years ago, you purchased silver dollars at face value for $150. H&rblock free online This is your adjusted basis in the property. H&rblock free online Your silver dollars were stolen this year. H&rblock free online The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. H&rblock free online Your theft loss is $150. H&rblock free online Recovered stolen property. H&rblock free online   Recovered stolen property is your property that was stolen and later returned to you. H&rblock free 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&rblock free online Use this amount to refigure your total loss for the year in which the loss was deducted. H&rblock free 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&rblock free online But report the difference only up to the amount of the loss that reduced your tax. H&rblock free online For more information on the amount to report, see Recoveries in chapter 12. H&rblock free 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&rblock free online However, other measures can also be used to establish certain decreases. H&rblock free online Appraisal. H&rblock free 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&rblock free online The appraiser must recognize the effects of any general market decline that may occur along with the casualty. H&rblock free online This information is needed to limit any deduction to the actual loss resulting from damage to the property. H&rblock free online   Several factors are important in evaluating the accuracy of an appraisal, including the following. H&rblock free online The appraiser's familiarity with your property before and after the casualty or theft. H&rblock free online The appraiser's knowledge of sales of comparable property in the area. H&rblock free online The appraiser's knowledge of conditions in the area of the casualty. H&rblock free online The appraiser's method of appraisal. H&rblock free 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&rblock free online For more information on disasters, see Disaster Area Losses, in Pub. H&rblock free online 547. H&rblock free online Cost of cleaning up or making repairs. H&rblock free online   The cost of repairing damaged property is not part of a casualty loss. H&rblock free online Neither is the cost of cleaning up after a casualty. H&rblock free 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&rblock free online The repairs are actually made. H&rblock free online The repairs are necessary to bring the property back to its condition before the casualty. H&rblock free online The amount spent for repairs is not excessive. H&rblock free online The repairs take care of the damage only. H&rblock free 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&rblock free online Landscaping. H&rblock free online   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. H&rblock free online You may be able to measure your loss by what you spend on the following. H&rblock free online Removing destroyed or damaged trees and shrubs minus any salvage you receive. H&rblock free online Pruning and other measures taken to preserve damaged trees and shrubs. H&rblock free online Replanting necessary to restore the property to its approximate value before the casualty. H&rblock free online Car value. H&rblock free online    Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. H&rblock free 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&rblock free 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&rblock free online If your car is not listed in the books, determine its value from other sources. H&rblock free 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&rblock free 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&rblock free online Cost of protection. H&rblock free online   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. H&rblock free online The amount you spend on insurance or to board up your house against a storm is not part of your loss. H&rblock free 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&rblock free online An example would be the cost of a dike to prevent flooding. H&rblock free online Exception. H&rblock free 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&rblock free online See Disaster Area Losses in Publication 547. H&rblock free online Incidental expenses. H&rblock free 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&rblock free online Replacement cost. H&rblock free online   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. H&rblock free online Sentimental value. H&rblock free online   Do not consider sentimental value when determining your loss. H&rblock free 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&rblock free online Decline in market value of property in or near casualty area. H&rblock free 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&rblock free online You have a loss only for actual casualty damage to your property. H&rblock free online However, if your home is in a federally declared disaster area, see Disaster Area Losses in Publication 547. H&rblock free online Costs of photographs and appraisals. H&rblock free online    Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. H&rblock free online Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. H&rblock free online    Appraisals are used to figure the decrease in FMV because of a casualty or theft. H&rblock free online See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. H&rblock free 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&rblock free 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&rblock free online For information about miscellaneous deductions, see chapter 28. H&rblock free 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&rblock free online For more information, see chapter 13. H&rblock free 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&rblock free online You do not have a casualty or theft loss to the extent you are reimbursed. H&rblock free 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&rblock free online You must reduce your loss even if you do not receive payment until a later tax year. H&rblock free online See Reimbursement Received After Deducting Loss , later. H&rblock free online Failure to file a claim for reimbursement. H&rblock free online   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. H&rblock free online Otherwise, you cannot deduct this loss as a casualty or theft loss. H&rblock free online However, this rule does not apply to the portion of the loss not covered by insurance (for example, a deductible). H&rblock free online Example. H&rblock free online You have a car insurance policy with a $1,000 deductible. H&rblock free 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&rblock free 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&rblock free online Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. H&rblock free online Other types of reimbursements are discussed next. H&rblock free online Also see the Instructions for Form 4684. H&rblock free online Employer's emergency disaster fund. H&rblock free 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&rblock free online Take into consideration only the amount you used to replace your destroyed or damaged property. H&rblock free online Example. H&rblock free online Your home was extensively damaged by a tornado. H&rblock free online Your loss after reimbursement from your insurance company was $10,000. H&rblock free online Your employer set up a disaster relief fund for its employees. H&rblock free online Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. H&rblock free online You received $4,000 from the fund and spent the entire amount on repairs to your home. H&rblock free 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&rblock free online Your casualty loss before applying the deduction limits discussed later is $6,000. H&rblock free online Cash gifts. H&rblock free 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&rblock free online This applies even if you use the money to pay for repairs to property damaged in the disaster. H&rblock free online Example. H&rblock free online Your home was damaged by a hurricane. H&rblock free online Relatives and neighbors made cash gifts to you that were excludable from your income. H&rblock free online You used part of the cash gifts to pay for repairs to your home. H&rblock free online There were no limits or restrictions on how you could use the cash gifts. H&rblock free 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&rblock free online Insurance payments for living expenses. H&rblock free online   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. H&rblock free online You lose the use of your main home because of a casualty. H&rblock free online Government authorities do not allow you access to your main home because of a casualty or threat of one. H&rblock free online Inclusion in income. H&rblock free online   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. H&rblock free online Report this amount on Form 1040, line 21. H&rblock free online However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. H&rblock free online See Qualified disaster relief payments, under Disaster Area Losses in Publication 547. H&rblock free 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&rblock free online Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. H&rblock free online Generally, these expenses include the amounts you pay for the following. H&rblock free online Rent for suitable housing. H&rblock free online Transportation. H&rblock free online Food. H&rblock free online Utilities. H&rblock free online Miscellaneous services. H&rblock free 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&rblock free online Example. H&rblock free online As a result of a fire, you vacated your apartment for a month and moved to a motel. H&rblock free online You normally pay $525 a month for rent. H&rblock free online None was charged for the month the apartment was vacated. H&rblock free online Your motel rent for this month was $1,200. H&rblock free online You normally pay $200 a month for food. H&rblock free online Your food expenses for the month you lived in the motel were $400. H&rblock free online You received $1,100 from your insurance company to cover your living expenses. H&rblock free online You determine the payment you must include in income as follows. H&rblock free 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&rblock free 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&rblock free online Example. H&rblock free online Your main home was destroyed by a tornado in August 2011. H&rblock free online You regained use of your home in November 2012. H&rblock free 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&rblock free online You include this amount in income on your 2012 Form 1040. H&rblock free 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&rblock free online Disaster relief. H&rblock free 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&rblock free 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&rblock free online For more information, see Disaster Area Losses in Publication 547. H&rblock free online Disaster unemployment assistance payments are unemployment benefits that are taxable. H&rblock free online Generally, disaster relief grants and qualified disaster mitigation payments made under the Robert T. H&rblock free 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&rblock free online See Disaster Area Losses in Publication 547. H&rblock free 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&rblock free online This section explains the adjustment you may have to make. H&rblock free online Actual reimbursement less than expected. H&rblock free 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&rblock free online Example. H&rblock free online Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2012. H&rblock free online The accident was due to the negligence of the other driver. H&rblock free online At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. H&rblock free online You did not have a deductible loss in 2012. H&rblock free online In January 2013, the court awarded you a judgment of $2,000. H&rblock free online However, in July it became apparent that you will be unable to collect any amount from the other driver. H&rblock free online You can deduct the loss in 2013 subject to the limits discussed later. H&rblock free online Actual reimbursement more than expected. H&rblock free 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&rblock free 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&rblock free online You do not refigure your tax for the year you claimed the deduction. H&rblock free online For more information, see Recoveries in chapter 12. H&rblock free 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&rblock free 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&rblock free online Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. H&rblock free 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&rblock free online Actual reimbursement same as expected. H&rblock free 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&rblock free online Example. H&rblock free online In December 2013, you had a collision while driving your personal car. H&rblock free online Repairs to the car cost $950. H&rblock free online You had $100 deductible collision insurance. H&rblock free online Your insurance company agreed to reimburse you for the rest of the damage. H&rblock free online Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. H&rblock free online Due to the $100 rule (discussed later under Deduction Limits ), you cannot deduct the $100 you paid as the deductible. H&rblock free online When you receive the $850 from the insurance company in 2014, do not report it as income. H&rblock free online Single Casualty on Multiple Properties Personal property. H&rblock free online   Personal property is any property that is not real property. H&rblock free 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&rblock free online Then combine these separate losses to figure the total loss from that casualty or theft. H&rblock free online Example. H&rblock free online A fire in your home destroyed an upholstered chair, an oriental rug, and an antique table. H&rblock free online You did not have fire insurance to cover your loss. H&rblock free online (This was the only casualty or theft you had during the year. H&rblock free online ) You paid $750 for the chair and you established that it had an FMV of $500 just before the fire. H&rblock free online The rug cost $3,000 and had an FMV of $2,500 just before the fire. H&rblock free online You bought the table at an auction for $100 before discovering it was an antique. H&rblock free online It had been appraised at $900 before the fire. H&rblock free 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&rblock free 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&rblock free online Figure the loss using the smaller of the adjusted basis or the decrease in FMV of the entire property. H&rblock free online Example. H&rblock free online You bought your home a few years ago. H&rblock free online You paid $160,000 ($20,000 for the land and $140,000 for the house). H&rblock free online You also spent $2,000 for landscaping. H&rblock free online This year a fire destroyed your home. H&rblock free online The fire also damaged the shrubbery and trees in your yard. H&rblock free online The fire was your only casualty or theft loss this year. H&rblock free online Competent appraisers valued the property as a whole at $200,000 before the fire, but only $30,000 after the fire. H&rblock free online (The loss to your household furnishings is not shown in this example. H&rblock free online It would be figured separately on each item, as explained earlier under Personal property . H&rblock free online ) Shortly after the fire, the insurance company paid you $155,000 for the loss. H&rblock free 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&rblock free 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&rblock free online You must reduce each casualty or theft loss by $100 ($100 rule). H&rblock free online You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule). H&rblock free online You make these reductions on Form 4684. H&rblock free 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&rblock free online For more detailed explanations and examples, see Publication 547. H&rblock free online Table 25-1. H&rblock free 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&rblock free online Apply this rule after you have figured the amount of your loss. H&rblock free online You must reduce your total casualty or theft loss by 10% of your adjusted gross income. H&rblock free online Apply this rule after you reduce each loss by $100 (the $100 rule). H&rblock free online Single Event Apply this rule only once, even if many pieces of property are affected. H&rblock free online Apply this rule only once, even if many pieces of property are affected. H&rblock free online More Than One Event Apply to the loss from each event. H&rblock free online Apply to the total of all your losses from all events. H&rblock free online More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) Apply separately to each person. H&rblock free online Apply separately to each person. H&rblock free online Married Couple—With Loss From the Same Event Filing Jointly Apply as if you were one person. H&rblock free online Apply as if you were one person. H&rblock free online Filing Separately Apply separately to each spouse. H&rblock free online Apply separately to each spouse. H&rblock free online More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. H&rblock free online Apply separately to each owner of jointly owned property. H&rblock free online Property used partly for business and partly for personal purposes. H&rblock free 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&rblock free 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&rblock free online $100 Rule After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. H&rblock free online This reduction applies to each total casualty or theft loss. H&rblock free online It does not matter how many pieces of property are involved in an event. H&rblock free online Only a single $100 reduction applies. H&rblock free online Example. H&rblock free online A hailstorm damages your home and your car. H&rblock free online Determine the amount of loss, as discussed earlier, for each of these items. H&rblock free online Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100. H&rblock free online Single event. H&rblock free online   Generally, events closely related in origin cause a single casualty. H&rblock free 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&rblock free 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&rblock free online Apply this rule after you reduce each loss by $100. H&rblock free online For more information, see the Form 4684 instructions. H&rblock free online If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. H&rblock free online Example 1. H&rblock free online In June, you discovered that your house had been burglarized. H&rblock free online Your loss after insurance reimbursement was $2,000. H&rblock free online Your adjusted gross income for the year you discovered the theft is $29,500. H&rblock free online You first apply the $100 rule and then the 10% rule. H&rblock free online Figure your theft loss deduction as follows. H&rblock free 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&rblock free online Example 2. H&rblock free online In March, you had a car accident that totally destroyed your car. H&rblock free online You did not have collision insurance on your car, so you did not receive any insurance reimbursement. H&rblock free online Your loss on the car was $1,800. H&rblock free online In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. H&rblock free online Your loss on the basement items after reimbursement was $2,100. H&rblock free online Your adjusted gross income for the year that the accident and fire occurred is $25,000. H&rblock free online You figure your casualty loss deduction as follows. H&rblock free 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&rblock free 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&rblock free 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&rblock free online Casualty or theft gains do not include gains you choose to postpone. H&rblock free online See Publication 547 for information on the postponement of gain. H&rblock free online Losses more than gains. H&rblock free 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&rblock free online The rest, if any, is your deductible loss from personal-use property. H&rblock free online Gains more than losses. H&rblock free online   If your recognized gains are more than your losses, subtract your losses from your gains. H&rblock free online The difference is treated as capital gain and must be reported on Schedule D (Form 1040). H&rblock free online The 10% rule does not apply to your gains. H&rblock free online When To Report Gains and Losses Gains. H&rblock free 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&rblock free 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&rblock free online If you have a loss, see Table 25-2 . H&rblock free online Table 25-2. H&rblock free online When To Deduct a Loss IF you have a loss. H&rblock free online . H&rblock free online . H&rblock free online THEN deduct it in the year. H&rblock free online . H&rblock free online . H&rblock free online from a casualty, the loss occurred. H&rblock free online in a federally declared disaster area, the disaster occurred or the year immediately before the disaster. H&rblock free online from a theft, the theft was discovered. H&rblock free online on a deposit treated as a:   • casualty or any ordinary loss, a reasonable estimate can be made. H&rblock free online • bad debt, deposits are totally worthless. H&rblock free online Losses. H&rblock free online   Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. H&rblock free online This is true even if you do not repair or replace the damaged property until a later year. H&rblock free online   You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. H&rblock free 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&rblock free online Loss on deposits. H&rblock free online   If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits , earlier. H&rblock free online Disaster Area Loss You generally must deduct a casualty loss in the year it occurred. H&rblock free 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&rblock free online The year the disaster occurred. H&rblock free online The year immediately preceding the year the disaster occurred. H&rblock free online Gains. H&rblock free online    Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. H&rblock free online For those special rules, see Publication 547. H&rblock free online Postponed tax deadlines. H&rblock free online   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. H&rblock free 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&rblock free 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&rblock free online Go to www. H&rblock free online irs. H&rblock free online gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. H&rblock free online Who is eligible. H&rblock free online   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. H&rblock free online Any individual whose main home is located in a covered disaster area (defined next). H&rblock free online Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. H&rblock free 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&rblock free 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&rblock free online The main home or principal place of business does not have to be located in the covered disaster area. H&rblock free 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&rblock free online The spouse on a joint return with a taxpayer who is eligible for postponements. H&rblock free 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&rblock free online Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. H&rblock free online Any other person determined by the IRS to be affected by a federally declared disaster. H&rblock free online Covered disaster area. H&rblock free 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&rblock free online Abatement of interest and penalties. H&rblock free online   The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. H&rblock free online More information. H&rblock free online   For more information, see Disaster Area Losses in Publication 547. H&rblock free online How To Report Gains and Losses Use Form 4684 to report a gain or a deductible loss from a casualty or theft. H&rblock free 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&rblock free online Combine the gains and losses on one Form 4684. H&rblock free online Follow the form instructions as to which lines to fill out. H&rblock free online In addition, you must use the appropriate schedule to report a gain or loss. H&rblock free online The schedule you use depends on whether you have a gain or loss. H&rblock free online If you have a: Report it on: Gain Schedule D (Form 1040) Loss Schedule A (Form 1040) Adjustments to basis. H&rblock free 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&rblock free online Amounts you spend to restore your property after a casualty increase your adjusted basis. H&rblock free online See Adjusted Basis in chapter 13 for more information. H&rblock free online Net operating loss (NOL). H&rblock free 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&rblock free 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&rblock free online Or, you can use it to lower your tax in a later year. H&rblock free online You do not have to be in business to have an NOL from a casualty or theft loss. H&rblock free online For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. H&rblock free online Prev  Up  Next   Home   More Online Publications