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Tax Filing

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Tax Filing

Tax filing Publication 561 - Additional Material Table of Contents Tax Publications for Individual Taxpayers and Commonly Used Tax Forms Tax Publications for Individual Taxpayers and Commonly Used Tax Forms. Tax filing  Summary: This is a listing of tax publications and commonly used tax forms. Tax filing The text states:Tax Publications for Individual Taxpayers. Tax filing  See How to Get Tax Help for a variety of ways to get publications, including by computer, phone, and mail. Tax filing General Guides. Tax filing   1--Your Rights as a Taxpayer 17--Your Federal Income Tax (For Individuals) 334--Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) 509--Tax Calendars for 2007 553--Highlights of 2006 Tax Changes 910--IRS Guide to Free Tax Services Specialized Publications. Tax filing   3--Armed Forces' Tax Guide 54--Tax Guide for U. Tax filing S. Tax filing Citizens and Residents Aliens Abroad 225--Farmer's Tax Guide 463--Travel, Entertainment, Gift, and Car Expenses 501--Exemptions, Standard Deduction, and Filing Information 502--Medical and Dental Expenses 503--Child and Dependent Care Expenses 504--Divorced or Separated Individuals 505--Tax Withholding and Estimated Tax 514--Foreign Tax Credit for Individuals 516--U. Tax filing S. Tax filing Government Civilian Employees Stationed Abroad 517--Social Security and Other Information for Members of the Clergy and Religious Workers 519--U. Tax filing S. Tax filing Tax Guide for Aliens 520--Scholarships and Fellowships 521--Moving Expenses 523--Selling Your Home 524--Credit for the Elderly or the Disabled 525--Taxable and Nontaxable Income 526--Charitable Contributions 527--Residential Rental Property 529--Miscellaneous Deductions 530--Tax Information for First-Time Homeowners 531--Reporting Tip Income 536--Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 537--Installment Sales 541--Partnerships 544--Sales and Other Dispositions of Assets 547--Casualties, Disasters, and Thefts 550--Investment Income and Expenses 551--Basis of Assets 552--Recordkeeping for Individuals 554--Older Americans' Tax Guide 555--Community Property 556--Examination of Returns, Appeal Rights, and Claims for Refund 559--Survivors, Executors, and Administrators 561--Determining the Value of Donated Property 564--Mutual Fund Distributions 570--Tax Guide for Individuals With Income From U. Tax filing S. Tax filing Possessions 571--Tax-Sheltered Annuity Plans (403(b) Plans) 575--Pension and Annuity Income 584--Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) 587--Business Use of Your Home (Including Use by Daycare Providers) 590--Individual Retirement Arrangements (IRAs) 593--Tax Highlights for U. Tax filing S. Tax filing Citizens and Residents Going Abroad 594--What You Should Know About the IRS Collection Process 596--Earned Income Credit (EIC) 721--Tax Guide to U. Tax filing S. Tax filing Civil Service Retirement Benefits 901--U. Tax filing S. Tax filing Tax Treaties 907--Tax Highlights for Persons with Disabilities 908--Bankruptcy Tax Guide 915--Social Security and Equivalent Railroad Retirement Benefits 919--How Do I Adjust My Tax Withholding? 925--Passive Activity and At-Risk Rules 926--Household Employer's Tax Guide 929--Tax Rules for Children and Dependents 936--Home Mortgage Interest Deduction 946--How to Depreciate Property 947--Practice Before the IRS and Power of Attorney 950--Introduction to Estate and Gift Taxes 967--The IRS Will Figure Your Tax 969--Health Savings Accounts and Other Tax-Favored Health Plans 970--Tax Benefits for Education 971--Innocent Spouse Relief 972--Child Tax Credit 1542--Per Diem Rates 1544--Reporting Cash Payments of Over $10,000 (Received in a Trade or Business) 1546--The Taxpayer Advocate Service of the IRS - How to Get Help With Unresolved Tax Problems Spanish Language Publications. Tax filing   1SP--Derechos del Contribuyente 579SP--Cómo Preparar la Declaración de Impuesto Federal 594SP--Que es lo que Debemos Saber sobre el Proceso de Cobro del IRS 596SP--Crédito por Ingreso del Trabajo 850--English-Spanish Glossary of Words and Phrases Used in Publications Issued by the Internal Revenue Service 1544SP--Informe de Pagos en Efectivo en Exceso de $10,000 (Recibidos en una Ocupación o Negocio) Commonly Used Tax Forms. Tax filing  See How To Get Tax Help for a variety of ways to get forms, including by computer, fax, phone, and mail. Tax filing 1040--U. Tax filing S. Tax filing Individual Income Tax Return Schedule A&B--Itemized Deductions & Interest and Ordinary Dividends Schedule C--Profit or Loss From Business Schedule C-EZ--Net Profit From Business Schedule D--Capital Gains and Losses Schedule D-1--Continuation Sheet for Schedule D Schedule E--Supplemental Income and Loss Schedule EIC--Earned Income Credit Schedule F--Profit or Loss From Farming Schedule H--Household Employment Taxes Schedule J--Income Averaging for Farmers and Fishermen Schedule R--Credit for the Elderly or the Disabled Schedule SE--Self-Employment Tax 1040A--U. Tax filing S. Tax filing Individual Income Tax Return Schedule 1--Interest and Ordinary Dividends for Form 1040A Filers Schedule 2--Child and Dependent Care Expenses for Form 1040A Filers Schedule 3--Credit for the Elderly or the Disabled for Form 1040A Filers 1040EZ--Income Tax Return for Single and Joint Filers With No Dependents 1040-ES--Estimated Tax for Individuals 1040X--Amended U. Tax filing S. Tax filing Individual Income Tax Return 2106--Employee Business Expenses 2106-EZ--Unreimbursed Employee Business Expenses 2210--Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2441--Child and Dependent Care Expenses 2848--Power of Attorney and Declaration of Representative 3903--Moving Expenses 4562--Depreciation and Amortization 4868--Application for Automatic Extension of Time To File U. Tax filing S. Tax filing Individual Income Tax Return 4952--Investment Interest Expense Deduction 5329--Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 6251--Alternative Minimum Tax--Individuals 8283--Noncash Charitable Contributions 8582--Passive Activity Loss Limitations 8606--Nondeductible IRAs 8812--Additional Child Tax Credit 8822--Change of Address 8829--Expenses for Business Use of Your Home 8863--Education Credits 9465--Installment Agreement Request Prev  Up  Next   Home   More Online Publications

Topic 551 - Standard Deduction

The standard deduction is a dollar amount that reduces the amount of income on which you are taxed. In general, the standard deduction is adjusted each year for inflation and varies according to your filing status. You cannot take the standard deduction if you itemize deductions.

Your standard deduction consists of the basic standard deduction and any additional standard deduction for age or blindness.

The basic standard deduction of an individual who can be claimed as a dependent on another person's tax return is the greater of:

  1. An amount specified by law, or
  2. The individual's earned income plus a specified amount (but the total cannot be more than the basic standard deduction for his or her filing status)

The additional standard deduction consists of the sum of any additional amounts for age or blindness. The additional amount for age will be allowed if you are age 65 or older at the end of the tax year. You are considered to be 65 on the day before your 65th birthday. For the definition of blindness, refer to Publication 501, Exemptions, Standard Deduction, and Filing Information. The additional amount for blindness will be allowed if you are blind on the last day of the tax year. For example, a single taxpayer who is age 65 and blind would be entitled to a basic standard deduction and an additional standard deduction equal to the sum of the additional amounts for both age and blindness.

If you or your spouse were age 65 or older or blind at the end of the year, be sure to claim an additional standard deduction by checking the appropriate boxes for age or blindness on Form 1040A (PDF) or Form 1040 (PDF). You may not use Form 1040EZ (PDF) to claim an additional standard deduction.

Certain taxpayers are not entitled to the standard deduction. They are:

  1. A married individual filing as married filing separately, whose spouse itemizes deductions
  2. An individual who was a nonresident alien or dual status alien during any part of the year (note that residents of India may be able to claim the standard deduction if they meet certain criteria. Refer to Publication 519, U.S. Tax Guide for Aliens, for more information)
  3. An individual who files a return for a period of less than 12 months due to a change in his or her annual accounting period, or
  4. An estate or trust, common trust fund, or partnership

For more information, refer to Publication 501, Exemptions, Standard Deduction, and Filing Information.

Page Last Reviewed or Updated: February 27, 2014

The Tax Filing

Tax filing Publication 547 - Main Content Table of Contents CasualtyFamily pet. Tax filing Progressive deterioration. Tax filing Special Procedure for Damage From Corrosive Drywall Theft Loss on Deposits Proof of Loss Figuring a LossGain from reimbursement. Tax filing Business or income-producing property. Tax filing Loss of inventory. Tax filing Leased property. Tax filing Exception for personal-use real property. Tax filing Decrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Deduction Limits2% Rule $100 Rule 10% Rule Figuring the Deduction Figuring a GainPostponement of Gain When To Report Gains and LossesLoss on deposits. Tax filing Lessee's loss. Tax filing Disaster Area LossesDisaster loss to inventory. Tax filing Main home in disaster area. Tax filing Unsafe home. Tax filing Time limit for making choice. Tax filing Revoking your choice. Tax filing Figuring the loss deduction. Tax filing How to report the loss on Form 1040X. Tax filing Records. Tax filing Need a copy of your tax return for the preceding year? Postponed Tax Deadlines Contacting the Federal Emergency Management Agency (FEMA) How To Report Gains and LossesProperty held 1 year or less. Tax filing Property held more than 1 year. Tax filing Depreciable property. Tax filing Adjustments to Basis If Deductions Are More Than Income How To Get Tax HelpLow Income Taxpayer Clinics Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Tax filing A sudden event is one that is swift, not gradual or progressive. Tax filing An unexpected event is one that is ordinarily unanticipated and unintended. Tax filing 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. Tax filing Generally, casualty losses are deductible during the taxable year that the loss occurred. Tax filing See Table 3, later. Tax filing Deductible losses. Tax filing   Deductible casualty losses can result from a number of different causes, including the following. Tax filing Car accidents (but see Nondeductible losses , next, for exceptions). Tax filing Earthquakes. Tax filing Fires (but see Nondeductible losses , next, for exceptions). Tax filing Floods. Tax filing Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses , later. Tax filing Mine cave-ins. Tax filing Shipwrecks. Tax filing Sonic booms. Tax filing Storms, including hurricanes and tornadoes. Tax filing Terrorist attacks. Tax filing Vandalism. Tax filing Volcanic eruptions. Tax filing Nondeductible losses. Tax filing   A casualty loss is not deductible if the damage or destruction is caused by the following. Tax filing Accidentally breaking articles such as glassware or china under normal conditions. Tax filing A family pet (explained below). Tax filing A fire if you willfully set it, or pay someone else to set it. Tax filing A car accident if your willful negligence or willful act caused it. Tax filing The same is true if the willful act or willful negligence of someone acting for you caused the accident. Tax filing Progressive deterioration (explained below). Tax filing However, see Special Procedure for Damage From Corrosive Drywall , later. Tax filing Family pet. Tax filing   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. Tax filing Example. Tax filing Your antique oriental rug was damaged by your new puppy before it was housebroken. Tax filing Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. Tax filing Progressive deterioration. Tax filing   Loss of property due to progressive deterioration is not deductible as a casualty loss. Tax filing This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Tax filing The following are examples of damage due to progressive deterioration. Tax filing The steady weakening of a building due to normal wind and weather conditions. Tax filing The deterioration and damage to a water heater that bursts. Tax filing However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. Tax filing Most losses of property caused by droughts. Tax filing To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. Tax filing Termite or moth damage. Tax filing The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. Tax filing However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. Tax filing Special Procedure for Damage From Corrosive Drywall Under a special procedure, you can deduct the amounts you paid to repair damage to your home and household appliances due to corrosive drywall. Tax filing Under this procedure, you treat the amounts paid for repairs as a casualty loss in the year of payment. Tax filing For example, amounts you paid for repairs in 2013 are deductible on your 2013 tax return and amounts you paid for repairs in 2012 are deductible on your 2012 tax return. Tax filing Note. Tax filing If you paid for any repairs before 2013 and you choose to follow this special procedure, you can amend your return for the earlier year by filing Form 1040X, Amended U. Tax filing S. Tax filing Individual Income Tax Return, and attaching a completed Form 4684 for the appropriate year. Tax filing Form 4684 for the appropriate year can be found at IRS. Tax filing gov. Tax filing Generally, Form 1040X must be filed within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. Tax filing Corrosive drywall. Tax filing   For purposes of this special procedure, “corrosive drywall” means drywall that is identified as problem drywall under the two-step identification method published by the Consumer Product Safety Commission (CPSC) and the Department of Housing and Urban Development (HUD) in their interim guidance dated January 28, 2010, as revised by the CPSC and HUD. Tax filing The revised identification guidance and remediation guidelines are available at www. Tax filing cpsc. Tax filing gov/Safety-Education/Safety-Education-Centers/Drywall. Tax filing Special instructions for completing Form 4684. Tax filing   If you choose to follow this special procedure, complete Form 4684, Section A, according to the instructions below. Tax filing The IRS will not challenge your treatment of damage resulting from corrosive drywall as a casualty loss if you determine and report the loss as explained below. Tax filing Top margin of Form 4684. Tax filing   Enter “Revenue Procedure 2010-36”. Tax filing Line 1. Tax filing   Enter the information required by the line 1 instructions. Tax filing Line 2. Tax filing   Skip this line. Tax filing Line 3. Tax filing   Enter the amount of insurance or other reimbursements you received (including through litigation). Tax filing If none, enter -0-. Tax filing Lines 4–7. Tax filing   Skip these lines. Tax filing Line 8. Tax filing   Enter the amount you paid to repair the damage to your home and household appliances due to corrosive drywall. Tax filing Enter only the amounts you paid to restore your home to the condition existing immediately before the damage. Tax filing Do not enter any amounts you paid for improvements or additions that increased the value of your home above its pre-loss value. Tax filing If you replaced a household appliance instead of repairing it, enter the lesser of: The current cost to replace the original appliance, or The basis of the original appliance (generally its cost). Tax filing Line 9. Tax filing   If line 8 is more than line 3, do one of the following. Tax filing If you have a pending claim for reimbursement (or you intend to pursue reimbursement), enter 75% of the difference between lines 3 and 8. Tax filing If item (1) does not apply to you, enter the full amount of the difference between lines 3 and 8. Tax filing If line 8 is less than or equal to line 3, you cannot claim a casualty loss deduction using this special procedure. Tax filing    If you have a pending claim for reimbursement (or you intend to pursue reimbursement), you may have income or an additional deduction in a later tax year depending on the actual amount of reimbursement received. Tax filing See Reimbursement Received After Deducting Loss, later. Tax filing Lines 10–18. Tax filing   Complete these lines according to the Instructions for Form 4684. Tax filing Choosing not to follow this special procedure. Tax filing   If you choose not to follow this special procedure, you are subject to all of the provisions that apply to the deductibility of casualty losses, and you must complete lines 1–9 according to the Instructions for Form 4684. Tax filing This means, for example, that you must establish that the damage, destruction, or loss of property resulted from an identifiable event as defined earlier under Casualty . Tax filing Furthermore, you must have proof that shows the following. Tax filing The loss is properly deductible in the tax year you claimed it and not in some other year. Tax filing See When To Report Gains and Losses , later. Tax filing The amount of the claimed loss. Tax filing See Proof of Loss , later. Tax filing No claim for reimbursement of any portion of the loss exists for which there is a reasonable prospect of recovery. Tax filing See When To Report Gains and Losses , later. Tax filing Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. Tax filing The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. Tax filing You do not need to show a conviction for theft. Tax filing Theft includes the taking of money or property by the following means. Tax filing Blackmail. Tax filing Burglary. Tax filing Embezzlement. Tax filing Extortion. Tax filing Kidnapping for ransom. Tax filing Larceny. Tax filing Robbery. Tax filing The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Tax filing Decline in market value of stock. Tax filing   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. Tax filing 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. Tax filing You report a capital loss on Schedule D (Form 1040). Tax filing For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Tax filing Mislaid or lost property. Tax filing    The simple disappearance of money or property is not a theft. Tax filing 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. Tax filing Sudden, unexpected, and unusual events were defined earlier under Casualty . Tax filing Example. Tax filing A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Tax filing The diamond falls from the ring and is never found. Tax filing The loss of the diamond is a casualty. Tax filing Losses from Ponzi-type investment schemes. Tax filing   The IRS has issued the following guidance to assist taxpayers who are victims of losses from Ponzi-type investment schemes: Revenue Ruling 2009-9, 2009-14 I. Tax filing R. Tax filing B. Tax filing 735 (available at www. Tax filing irs. Tax filing gov/irb/2009-14_IRB/ar07. Tax filing html). Tax filing Revenue Procedure 2009-20, 2009-14 I. Tax filing R. Tax filing B. Tax filing 749 (available at www. Tax filing irs. Tax filing gov/irb/2009-14_IRB/ar11. Tax filing html). Tax filing Revenue Procedure 2011-58, 2011-50 I. Tax filing R. Tax filing B. Tax filing 847 (available at www. Tax filing irs. Tax filing gov/irb/2011-50_IRB/ar11. Tax filing html). Tax filing 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. Tax filing Skip lines 19 to 27, but you must fill out Section B, lines 29 to 39, as appropriate. Tax filing Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Tax filing You do not need to complete Appendix A. Tax filing For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. Tax filing   If you choose not to use the procedures in Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. Tax filing Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Tax filing If you incurred this type of loss, you can choose one of the following ways to deduct the loss. Tax filing As a casualty loss. Tax filing As an ordinary loss. Tax filing As a nonbusiness bad debt. Tax filing Casualty loss or ordinary loss. Tax filing   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. Tax filing The choice generally is 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. Tax filing 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. Tax filing 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. Tax filing Once you make the choice, you cannot change it without permission from the Internal Revenue Service. Tax filing   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Tax filing The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. Tax filing Your loss is subject to the 2%-of-adjusted-gross-income limit. Tax filing You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. Tax filing Nonbusiness bad debt. Tax filing   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. Tax filing How to report. Tax filing   The kind of deduction you choose for your loss on deposits determines how you report your loss. Tax filing See Table 1. Tax filing More information. Tax filing   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684. Tax filing Deducted loss recovered. Tax filing   If you recover an amount you deducted as a loss in an earlier year, you may have to include the amount recovered in your income for the year of recovery. Tax filing If any part of the original deduction did not reduce your tax in the earlier year, you do not have to include that part of the recovery in your income. Tax filing For more information, see Recoveries in Publication 525. Tax filing Proof of Loss To deduct a casualty or theft loss, you must be able to show that there was a casualty or theft. Tax filing You also must be able to support the amount you take as a deduction. Tax filing Casualty loss proof. Tax filing   For a casualty loss, you should be able to show all of the following. Tax filing The type of casualty (car accident, fire, storm, etc. Tax filing ) and when it occurred. Tax filing That the loss was a direct result of the casualty. Tax filing 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. Tax filing Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Tax filing Theft loss proof. Tax filing   For a theft loss, you should be able to show all of the following. Tax filing When you discovered that your property was missing. Tax filing That your property was stolen. Tax filing That you were the owner of the property. Tax filing Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Tax filing    It is important that you have records that will prove your deduction. Tax filing If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. Tax filing Figuring a Loss To determine your deduction for a casualty or theft loss, you must first figure your loss. Tax filing Table 1. Tax filing Reporting Loss on Deposits IF you choose to report the loss as a(n). Tax filing . Tax filing . Tax filing   THEN report it on. Tax filing . Tax filing . Tax filing casualty loss   Form 4684 and Schedule A  (Form 1040). Tax filing ordinary loss   Schedule A (Form 1040). Tax filing nonbusiness bad debt   Form 8949 and Schedule D (Form 1040). Tax filing Amount of loss. Tax filing   Figure the amount of your loss using the following steps. Tax filing Determine your adjusted basis in the property before the casualty or theft. Tax filing Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. Tax filing From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. Tax filing 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. Tax filing Gain from reimbursement. Tax filing   If your reimbursement is more than your adjusted basis in the property, you have a gain. Tax filing This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. Tax filing If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. Tax filing See Figuring a Gain , later. Tax filing Business or income-producing property. Tax filing   If you have business or income-producing property, such as rental property, and it is stolen or completely destroyed, the decrease in FMV is not considered. Tax filing Your loss is figured as follows:   Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive   Loss of inventory. Tax filing   There are two ways you can deduct a casualty or theft loss of inventory, including items you hold for sale to customers. Tax filing   One way is to deduct the loss through the increase in the cost of goods sold by properly reporting your opening and closing inventories. Tax filing Do not claim this loss again as a casualty or theft loss. Tax filing If you take the loss through the increase in the cost of goods sold, include any insurance or other reimbursement you receive for the loss in gross income. Tax filing   The other way is to deduct the loss separately. Tax filing If you deduct it separately, eliminate the affected inventory items from the cost of goods sold by making a downward adjustment to opening inventory or purchases. Tax filing Reduce the loss by the reimbursement you received. Tax filing Do not include the reimbursement in gross income. Tax filing If you do not receive the reimbursement by the end of the year, you may not claim a loss to the extent you have a reasonable prospect of recovery. Tax filing Leased property. Tax filing   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. Tax filing Separate computations. Tax filing   Generally, if a single casualty or theft involves more than one item of property, you must figure the loss on each item separately. Tax filing Then combine the losses to determine the total loss from that casualty or theft. Tax filing Exception for personal-use real property. Tax filing   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. Tax filing Figure the loss using the smaller of the following. Tax filing The decrease in FMV of the entire property. Tax filing The adjusted basis of the entire property. Tax filing   See Real property under Figuring the Deduction, later. Tax filing 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. Tax filing 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. Tax filing FMV of stolen property. Tax filing   The FMV of property immediately after a theft is considered to be zero because you no longer have the property. Tax filing Example. Tax filing Several years ago, you purchased silver dollars at face value for $150. Tax filing This is your adjusted basis in the property. Tax filing Your silver dollars were stolen this year. Tax filing The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. Tax filing Your theft loss is $150. Tax filing Recovered stolen property. Tax filing   Recovered stolen property is your property that was stolen and later returned to you. Tax filing 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. Tax filing Use this amount to refigure your total loss for the year in which the loss was deducted. Tax filing   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. Tax filing But report the difference only up to the amount of the loss that reduced your tax. Tax filing For more information on the amount to report, see Recoveries in Publication 525. Tax filing 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. Tax filing However, other measures also can be used to establish certain decreases. Tax filing See Appraisal and Cost of cleaning up or making repairs , next. Tax filing Appraisal. Tax filing   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterwards should be made by a competent appraiser. Tax filing The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Tax filing This information is needed to limit any deduction to the actual loss resulting from damage to the property. Tax filing   Several factors are important in evaluating the accuracy of an appraisal, including the following. Tax filing The appraiser's familiarity with your property before and after the casualty or theft. Tax filing The appraiser's knowledge of sales of comparable property in the area. Tax filing The appraiser's knowledge of conditions in the area of the casualty. Tax filing The appraiser's method of appraisal. Tax filing 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. Tax filing For more information on disasters, see Disaster Area Losses, later. Tax filing Cost of cleaning up or making repairs. Tax filing   The cost of repairing damaged property is not part of a casualty loss. Tax filing Neither is the cost of cleaning up after a casualty. Tax filing But you can use the cost of cleaning up or of making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Tax filing The repairs are actually made. Tax filing The repairs are necessary to bring the property back to its condition before the casualty. Tax filing The amount spent for repairs is not excessive. Tax filing The repairs take care of the damage only. Tax filing The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Tax filing Landscaping. Tax filing   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. Tax filing You may be able to measure your loss by what you spend on the following. Tax filing Removing destroyed or damaged trees and shrubs, minus any salvage you receive. Tax filing Pruning and other measures taken to preserve damaged trees and shrubs. Tax filing Replanting necessary to restore the property to its approximate value before the casualty. Tax filing Car value. Tax filing   Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. Tax filing You can use the books' retail values and modify them by factors such as the mileage and condition of your car to figure its value. Tax filing 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. Tax filing If your car is not listed in the books, determine its value from other sources. Tax filing A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. Tax filing 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. Tax filing Cost of protection. Tax filing   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. Tax filing The amount you spend on insurance or to board up your house against a storm is not part of your loss. Tax filing If the property is business property, these expenses are deductible as business expenses. Tax filing   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. Tax filing An example would be the cost of a dike to prevent flooding. Tax filing Exception. Tax filing   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 (discussed later under Disaster Area Losses ). Tax filing Related expenses. Tax filing   The incidental expenses 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. Tax filing However, they may be deductible as business expenses if the damaged or stolen property is business property. Tax filing Replacement cost. Tax filing   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. Tax filing Example. Tax filing You bought a new chair 4 years ago for $300. Tax filing In April, a fire destroyed the chair. Tax filing You estimate that it would cost $500 to replace it. Tax filing If you had sold the chair before the fire, you estimate that you could have received only $100 for it because it was 4 years old. Tax filing The chair was not insured. Tax filing Your loss is $100, the FMV of the chair before the fire. Tax filing It is not $500, the replacement cost. Tax filing Sentimental value. Tax filing   Do not consider sentimental value when determining your loss. Tax filing 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. Tax filing Decline in market value of property in or near casualty area. Tax filing   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. Tax filing You have a loss only for actual casualty damage to your property. Tax filing However, if your home is in a federally declared disaster area, see Disaster Area Losses , later. Tax filing Costs of photographs and appraisals. Tax filing   Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. Tax filing Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. Tax filing   Appraisals are used to figure the decrease in FMV because of a casualty or theft. Tax filing See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. Tax filing   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. Tax filing They are expenses in determining your tax liability. Tax filing You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). Tax filing Adjusted Basis The measure of your investment in the property you own is its basis. Tax filing For property you buy, your basis is usually its cost to you. Tax filing For property you acquire in some other way, such as inheriting it, receiving it as a gift, or getting it in a nontaxable exchange, you must figure your basis in another way, as explained in Publication 551. Tax filing If you inherited the property from someone who died in 2010 and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Tax filing Adjustments to basis. Tax filing    While you own the property, various events may take place that change your basis. Tax filing Some events, such as additions or permanent improvements to the property, increase basis. Tax filing Others, such as earlier casualty losses and depreciation deductions, decrease basis. Tax filing When you add the increases to the basis and subtract the decreases from the basis, the result is your adjusted basis. Tax filing See Publication 551 for more information on figuring the basis of your property. Tax filing Insurance and Other Reimbursements If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Tax filing You do not have a casualty or theft loss to the extent you are reimbursed. Tax filing If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Tax filing You must reduce your loss even if you do not receive payment until a later tax year. Tax filing See Reimbursement Received After Deducting Loss , later. Tax filing Failure to file a claim for reimbursement. Tax filing   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Tax filing Otherwise, you cannot deduct this loss as a casualty or theft. Tax filing The portion of the loss usually not covered by insurance (for example, a deductible) is not subject to this rule. Tax filing Example. Tax filing You have a car insurance policy with a $1,000 deductible. Tax filing Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the $100 and 10% rules, discussed later). Tax filing This is true, even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. Tax filing Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. Tax filing Other types of reimbursements are discussed next. Tax filing Also see the Instructions for Form 4684. Tax filing Employer's emergency disaster fund. Tax filing   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. Tax filing Take into consideration only the amount you used to replace your destroyed or damaged property. Tax filing Example. Tax filing Your home was extensively damaged by a tornado. Tax filing Your loss after reimbursement from your insurance company was $10,000. Tax filing Your employer set up a disaster relief fund for its employees. Tax filing Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. Tax filing You received $4,000 from the fund and spent the entire amount on repairs to your home. Tax filing In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. Tax filing Your casualty loss before applying the deduction limits (discussed later) is $6,000. Tax filing Cash gifts. Tax filing   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. Tax filing This applies even if you use the money to pay for repairs to property damaged in the disaster. Tax filing Example. Tax filing Your home was damaged by a hurricane. Tax filing Relatives and neighbors made cash gifts to you that were excludable from your income. Tax filing You used part of the cash gifts to pay for repairs to your home. Tax filing There were no limits or restrictions on how you could use the cash gifts. Tax filing It was an excludable gift, so the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. Tax filing Insurance payments for living expenses. Tax filing   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. Tax filing You lose the use of your main home because of a casualty. Tax filing Government authorities do not allow you access to your main home because of a casualty or threat of one. Tax filing Inclusion in income. Tax filing   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Tax filing Report this amount on Form 1040, line 21. Tax filing However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. Tax filing See Qualified disaster relief payments , later, under Disaster Area Losses. Tax filing   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. Tax filing Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. Tax filing Generally, these expenses include the amounts you pay for the following. Tax filing Renting suitable housing. Tax filing Transportation. Tax filing Food. Tax filing Utilities. Tax filing Miscellaneous services. Tax filing 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. Tax filing Example. Tax filing As a result of a fire, you vacated your apartment for a month and moved to a motel. Tax filing You normally pay $525 a month for rent. Tax filing None was charged for the month the apartment was vacated. Tax filing Your motel rent for this month was $1,200. Tax filing You normally pay $200 a month for food. Tax filing Your food expenses for the month you lived in the motel were $400. Tax filing You received $1,100 from your insurance company to cover your living expenses. Tax filing You determine the payment you must include in income as follows. Tax filing 1. Tax filing Insurance payment for living expenses $1,100 2. Tax filing Actual expenses during the month you are unable to use your home because of the fire $1,600   3. Tax filing Normal living expenses 725   4. Tax filing Temporary increase in living expenses: Subtract line 3  from line 2 875 5. Tax filing Amount of payment includible in income: Subtract line 4 from line 1 $ 225 Tax year of inclusion. Tax filing   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. Tax filing Example. Tax filing Your main home was destroyed by a tornado in August 2011. Tax filing You regained use of your home in November 2012. Tax filing The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. Tax filing You include this amount in income on your 2012 Form 1040. Tax filing 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. Tax filing Disaster relief. Tax filing   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. Tax filing Table 2. Tax filing Deduction Limit Rules for Personal-Use and Employee Property       $100 Rule 10% Rule 2% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. Tax filing Apply this rule to personal-use property after you have figured the amount of your loss. Tax filing You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Tax filing Apply this rule to personal-use property after you reduce each loss by $100 (the $100 rule). Tax filing You must reduce your total casualty or theft loss by 2% of your adjusted gross income. Tax filing Apply this rule to property you used in performing services as an employee after you have figured the amount of your loss and added it to your job expenses and most other miscellaneous itemized deductions. Tax filing Single Event Apply this rule only once, even if many pieces of property are affected. Tax filing Apply this rule only once, even if many pieces of property are affected. Tax filing Apply this rule only once, even if many pieces of property are affected. Tax filing More Than One Event Apply to the loss from each event. Tax filing Apply to the total of all your losses from all events. Tax filing Apply to the total of all your losses from all events. Tax filing More Than One Person— With Loss From the   Same Event  (other than a married couple  filing jointly) Apply separately to each person. Tax filing Apply separately to each person. Tax filing Apply separately to each person. Tax filing Married Couple—  With Loss From the  Same Event Filing Joint Return Apply as if you were one person. Tax filing Apply as if you were one person. Tax filing Apply as if you were one person. Tax filing Filing Separate Return Apply separately to each spouse. Tax filing Apply separately to each spouse. Tax filing Apply separately to each spouse. Tax filing More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. Tax filing Apply separately to each owner of jointly owned property. Tax filing Apply separately to each owner of jointly owned property. Tax filing    Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster, are not taxable income to you. Tax filing For more information, see Qualified disaster relief payments under Disaster Area Losses, later. Tax filing   Disaster unemployment assistance payments are unemployment benefits that are taxable. Tax filing   Generally, disaster relief grants received under the Robert T. Tax filing Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Tax filing See Federal disaster relief grants , later, under Disaster Area Losses. Tax filing Loan proceeds. Tax filing   Do not reduce your casualty loss by loan proceeds you use to rehabilitate or replace property on which you are claiming a casualty loss deduction. Tax filing If you have a federal loan that is canceled (forgiven), see Federal loan canceled , later, under Disaster Area Losses. Tax filing Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using the amount of your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. Tax filing This section explains the adjustment you may have to make. Tax filing Actual reimbursement less than expected. Tax filing   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. Tax filing Example. Tax filing Your personal car had a FMV of $2,000 when it was destroyed in a collision with another car in 2012. Tax filing The accident was due to the negligence of the other driver. Tax filing At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. Tax filing You did not have a deductible loss in 2012. Tax filing In January 2013, the court awards you a judgment of $2,000. Tax filing However, in July it becomes apparent that you will be unable to collect any amount from the other driver. Tax filing Since this is your only casualty or theft loss, you can deduct the loss in 2013 that is figured by applying the Deduction Limits (discussed later). Tax filing Actual reimbursement more than expected. Tax filing   If you later receive more reimbursement than you expected, after you have claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Tax filing 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. Tax filing You do not refigure your tax for the year you claimed the deduction. Tax filing See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Tax filing Example. Tax filing In 2012, a hurricane destroyed your motorboat. Tax filing Your loss was $3,000, and you estimated that your insurance would cover $2,500 of it. Tax filing You did not itemize deductions on your 2012 return, so you could not deduct the loss. Tax filing When the insurance company reimburses you for the loss, you do not report any of the reimbursement as income. Tax filing This is true even if it is for the full $3,000 because you did not deduct the loss on your 2012 return. Tax filing The loss did not reduce your tax. Tax filing    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. Tax filing 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. Tax filing Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. Tax filing You may be able to postpone reporting any remaining gain as explained under Postponement of Gain, later. Tax filing Actual reimbursement same as expected. Tax filing   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. Tax filing Example. Tax filing In December 2013, you had a collision while driving your personal car. Tax filing Repairs to the car cost $950. Tax filing You had $100 deductible collision insurance. Tax filing Your insurance company agreed to reimburse you for the rest of the damage. Tax filing Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. Tax filing Due to the $100 rule, you cannot deduct the $100 you paid as the deductible. Tax filing When you receive the $850 from the insurance company in 2014, do not report it as income. Tax filing Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. Tax filing The deduction for casualty and theft losses of employee property and personal-use property is limited. Tax filing A loss on employee property is subject to the 2% rule, discussed next. Tax filing With certain exceptions, a loss on property you own for your personal use is subject to the $100 and 10% rules, discussed later. Tax filing The 2%, $100, and 10% rules are also summarized in Table 2 . Tax filing Losses on business property (other than employee property) and income-producing property are not subject to these rules. Tax filing However, if your casualty or theft loss involved a home you used for business or rented out, your deductible loss may be limited. Tax filing See the Instructions for Form 4684, Section B. Tax filing If the casualty or theft loss involved property used in a passive activity, see Form 8582, Passive Activity Loss Limitations, and its instructions. Tax filing 2% Rule The casualty and theft loss deduction for employee property, when added to your job expenses and most other miscellaneous itemized deductions on Schedule A (Form 1040) or Form 1040NR, Schedule A, must be reduced by 2% of your adjusted gross income. Tax filing Employee property is property used in performing services as an employee. Tax filing $100 Rule After you have figured your casualty or theft loss on personal-use property, as discussed earlier, you must reduce that loss by $100. Tax filing This reduction applies to each total casualty or theft loss. Tax filing It does not matter how many pieces of property are involved in an event. Tax filing Only a single $100 reduction applies. Tax filing Example. Tax filing You have $750 deductible collision insurance on your car. Tax filing The car is damaged in a collision. Tax filing The insurance company pays you for the damage minus the $750 deductible. Tax filing The amount of the casualty loss is based solely on the deductible. Tax filing The casualty loss is $650 ($750 − $100) because the first $100 of a casualty loss on personal-use property is not deductible. Tax filing Single event. Tax filing   Generally, events closely related in origin cause a single casualty. Tax filing 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. Tax filing A single casualty may also damage two or more pieces of property, such as a hailstorm that damages both your home and your car parked in your driveway. Tax filing Example 1. Tax filing A thunderstorm destroyed your pleasure boat. Tax filing You also lost some boating equipment in the storm. Tax filing Your loss was $5,000 on the boat and $1,200 on the equipment. Tax filing Your insurance company reimbursed you $4,500 for the damage to your boat. Tax filing You had no insurance coverage on the equipment. Tax filing Your casualty loss is from a single event and the $100 rule applies once. Tax filing Figure your loss before applying the 10% rule (discussed later) as follows. Tax filing     Boat Equipment 1. Tax filing Loss $5,000 $1,200 2. Tax filing Subtract insurance 4,500 -0- 3. Tax filing Loss after reimbursement $ 500 $1,200 4. Tax filing Total loss $1,700 5. Tax filing Subtract $100 100 6. Tax filing Loss before 10% rule $1,600 Example 2. Tax filing Thieves broke into your home in January and stole a ring and a fur coat. Tax filing You had a loss of $200 on the ring and $700 on the coat. Tax filing This is a single theft. Tax filing The $100 rule applies to the total $900 loss. Tax filing Example 3. Tax filing In September, hurricane winds blew the roof off your home. Tax filing Flood waters caused by the hurricane further damaged your home and destroyed your furniture and personal car. Tax filing This is considered a single casualty. Tax filing The $100 rule is applied to your total loss from the flood waters and the wind. Tax filing More than one loss. Tax filing   If you have more than one casualty or theft loss during your tax year, you must reduce each loss by $100. Tax filing Example. Tax filing Your family car was damaged in an accident in January. Tax filing Your loss after the insurance reimbursement was $75. Tax filing In February, your car was damaged in another accident. Tax filing This time your loss after the insurance reimbursement was $90. Tax filing Apply the $100 rule to each separate casualty loss. Tax filing Since neither accident resulted in a loss of over $100, you are not entitled to any deduction for these accidents. Tax filing More than one person. Tax filing   If two or more individuals (other than a husband and wife filing a joint return) have losses from the same casualty or theft, the $100 rule applies separately to each individual. Tax filing Example. Tax filing A fire damaged your house and also damaged the personal property of your house guest. Tax filing You must reduce your loss by $100. Tax filing Your house guest must reduce his or her loss by $100. Tax filing Married taxpayers. Tax filing   If you and your spouse file a joint return, you are treated as one individual in applying the $100 rule. Tax filing It does not matter whether you own the property jointly or separately. Tax filing   If you and your spouse have a casualty or theft loss and you file separate returns, each of you must reduce your loss by $100. Tax filing This is true even if you own the property jointly. Tax filing If one spouse owns the property, only that spouse can figure a loss deduction on a separate return. Tax filing   If the casualty or theft loss is on property you own as tenants by the entirety, each of you can figure your deduction on only one-half of the loss on separate returns. Tax filing Neither of you can figure your deduction on the entire loss on a separate return. Tax filing Each of you must reduce the loss by $100. Tax filing More than one owner. Tax filing   If two or more individuals (other than a husband and wife filing a joint return) have a loss on property jointly owned, the $100 rule applies separately to each. Tax filing For example, if two sisters live together in a home they own jointly and they have a casualty loss on the home, the $100 rule applies separately to each sister. Tax filing 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. Tax filing Apply this rule after you reduce each loss by $100. Tax filing For more information, see the Form 4684 instructions. Tax filing If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. Tax filing Example. Tax filing In June, you discovered that your house had been burglarized. Tax filing Your loss after insurance reimbursement was $2,000. Tax filing Your adjusted gross income for the year you discovered the theft is $29,500. Tax filing Figure your theft loss as follows. Tax filing 1. Tax filing Loss after insurance $2,000 2. Tax filing Subtract $100 100 3. Tax filing Loss after $100 rule $1,900 4. Tax filing Subtract 10% of $29,500 AGI $2,950 5. Tax filing Theft loss deduction $-0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($2,950). Tax filing More than one loss. Tax filing   If you have more than one casualty or theft loss during your tax year, reduce each loss by any reimbursement and by $100. Tax filing Then you must reduce the total of all your losses by 10% of your adjusted gross income. Tax filing Example. Tax filing In March, you had a car accident that totally destroyed your car. Tax filing You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Tax filing Your loss on the car was $1,800. Tax filing In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items you had stored there. Tax filing Your loss on the basement items after reimbursement was $2,100. Tax filing Your adjusted gross income for the year that the accident and fire occurred is $25,000. Tax filing You figure your casualty loss deduction as follows. Tax filing     Car Basement 1. Tax filing Loss $1,800 $2,100 2. Tax filing Subtract $100 per incident 100 100 3. Tax filing Loss after $100 rule $1,700 $2,000 4. Tax filing Total loss $3,700 5. Tax filing Subtract 10% of $25,000 AGI 2,500 6. Tax filing Casualty loss deduction $1,200 Married taxpayers. Tax filing   If you and your spouse file a joint return, you are treated as one individual in applying the 10% rule. Tax filing It does not matter if you own the property jointly or separately. Tax filing   If you file separate returns, the 10% rule applies to each return on which a loss is claimed. Tax filing More than one owner. Tax filing   If two or more individuals (other than husband and wife filing a joint return) have a loss on property that is owned jointly, the 10% rule applies separately to each. Tax filing Gains and losses. Tax filing   If you have casualty or theft gains as well as losses to personal-use property, you must compare your total gains to your total losses. Tax filing 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. Tax filing Casualty or theft gains do not include gains you choose to postpone. Tax filing See Postponement of Gain, later. Tax filing Losses more than gains. Tax filing   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. Tax filing The rest, if any, is your deductible loss from personal-use property. Tax filing Example. Tax filing Your theft loss after reducing it by reimbursements and by $100 is $2,700. Tax filing Your casualty gain is $700. Tax filing Your loss is more than your gain, so you must reduce your $2,000 net loss ($2,700 − $700) by 10% of your adjusted gross income. Tax filing Gains more than losses. Tax filing   If your recognized gains are more than your losses, subtract your losses from your gains. Tax filing The difference is treated as a capital gain and must be reported on Schedule D (Form 1040). Tax filing The 10% rule does not apply to your gains. Tax filing Example. Tax filing Your theft loss is $600 after reducing it by reimbursements and by $100. Tax filing Your casualty gain is $1,600. Tax filing Because your gain is more than your loss, you must report the $1,000 net gain ($1,600 − $600) on Schedule D (Form 1040). Tax filing More information. Tax filing   For information on how to figure recognized gains, see Figuring a Gain , later. Tax filing Figuring the Deduction Generally, you must figure your loss separately for each item stolen, damaged, or destroyed. Tax filing However, a special rule applies to real property you own for personal use. Tax filing Real property. Tax filing   In figuring a loss to real estate you own for personal use, all improvements (such as buildings and ornamental trees and the land containing the improvements) are considered together. Tax filing Example 1. Tax filing In June, a fire destroyed your lakeside cottage, which cost $144,800 (including $14,500 for the land) several years ago. Tax filing (Your land was not damaged. Tax filing ) This was your only casualty or theft loss for the year. Tax filing The FMV of the property immediately before the fire was $180,000 ($145,000 for the cottage and $35,000 for the land). Tax filing The FMV immediately after the fire was $35,000 (value of the land). Tax filing You collected $130,000 from the insurance company. Tax filing Your adjusted gross income for the year the fire occurred is $80,000. Tax filing Your deduction for the casualty loss is $6,700, figured in the following manner. Tax filing 1. Tax filing Adjusted basis of the entire property (cost in this example) $144,800 2. Tax filing FMV of entire property  before fire $180,000 3. Tax filing FMV of entire property after fire 35,000 4. Tax filing Decrease in FMV of entire property (line 2 − line 3) $145,000 5. Tax filing Loss (smaller of line 1 or line 4) $144,800 6. Tax filing Subtract insurance 130,000 7. Tax filing Loss after reimbursement $14,800 8. Tax filing Subtract $100 100 9. Tax filing Loss after $100 rule $14,700 10. Tax filing Subtract 10% of $80,000 AGI 8,000 11. Tax filing Casualty loss deduction $ 6,700 Example 2. Tax filing You bought your home a few years ago. Tax filing You paid $150,000 ($10,000 for the land and $140,000 for the house). Tax filing You also spent an additional $2,000 for landscaping. Tax filing This year a fire destroyed your home. Tax filing The fire also damaged the shrubbery and trees in your yard. Tax filing The fire was your only casualty or theft loss this year. Tax filing Competent appraisers valued the property as a whole at $175,000 before the fire, but only $50,000 after the fire. Tax filing Shortly after the fire, the insurance company paid you $95,000 for the loss. Tax filing Your adjusted gross income for this year is $70,000. Tax filing You figure your casualty loss deduction as follows. Tax filing 1. Tax filing Adjusted basis of the entire property (cost of land, building, and landscaping) $152,000 2. Tax filing FMV of entire property  before fire $175,000 3. Tax filing FMV of entire property after fire 50,000 4. Tax filing Decrease in FMV of entire property (line 2 − line 3) $125,000 5. Tax filing Loss (smaller of line 1 or line 4) $125,000 6. Tax filing Subtract insurance 95,000 7. Tax filing Loss after reimbursement $30,000 8. Tax filing Subtract $100 100 9. Tax filing Loss after $100 rule $29,900 10. Tax filing Subtract 10% of $70,000 AGI 7,000 11. Tax filing Casualty loss deduction $ 22,900 Personal property. Tax filing   Personal property is any property that is not real property. Tax filing 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. Tax filing Then combine these separate losses to figure the total loss. Tax filing Reduce the total loss by $100 and 10% of your adjusted gross income to figure the loss deduction. Tax filing Example 1. Tax filing In August, a storm destroyed your pleasure boat, which cost $18,500. Tax filing This was your only casualty or theft loss for the year. Tax filing Its FMV immediately before the storm was $17,000. Tax filing You had no insurance, but were able to salvage the motor of the boat and sell it for $200. Tax filing Your adjusted gross income for the year the casualty occurred is $70,000. Tax filing Although the motor was sold separately, it is part of the boat and not a separate item of property. Tax filing You figure your casualty loss deduction as follows. Tax filing 1. Tax filing Adjusted basis (cost in this example) $18,500 2. Tax filing FMV before storm $17,000 3. Tax filing FMV after storm 200 4. Tax filing Decrease in FMV  (line 2 − line 3) $16,800 5. Tax filing Loss (smaller of line 1 or line 4) $16,800 6. Tax filing Subtract insurance -0- 7. Tax filing Loss after reimbursement $16,800 8. Tax filing Subtract $100 100 9. Tax filing Loss after $100 rule $16,700 10. Tax filing Subtract 10% of $70,000 AGI 7,000 11. Tax filing Casualty loss deduction $ 9,700 Example 2. Tax filing In June, you were involved in an auto accident that totally destroyed your personal car and your antique pocket watch. Tax filing You had bought the car for $30,000. Tax filing The FMV of the car just before the accident was $17,500. Tax filing Its FMV just after the accident was $180 (scrap value). Tax filing Your insurance company reimbursed you $16,000. Tax filing Your watch was not insured. Tax filing You had purchased it for $250. Tax filing Its FMV just before the accident was $500. Tax filing Your adjusted gross income for the year the accident occurred is $97,000. Tax filing Your casualty loss deduction is zero, figured as follows. Tax filing     Car Watch 1. Tax filing Adjusted basis (cost) $30,000 $250 2. Tax filing FMV before accident $17,500 $500 3. Tax filing FMV after accident 180 -0- 4. Tax filing Decrease in FMV (line 2 − line 3) $17,320 $500 5. Tax filing Loss (smaller of line 1 or line 4) $17,320 $250 6. Tax filing Subtract insurance 16,000 -0- 7. Tax filing Loss after reimbursement $1,320 $250 8. Tax filing Total loss $1,570 9. Tax filing Subtract $100 100 10. Tax filing Loss after $100 rule $1,470 11. Tax filing Subtract 10% of $97,000 AGI 9,700 12. Tax filing Casualty loss deduction $ -0- Both real and personal properties. Tax filing   When a casualty involves both real and personal properties, you must figure the loss separately for each type of property. Tax filing However, you apply a single $100 reduction to the total loss. Tax filing Then, you apply the 10% rule to figure the casualty loss deduction. Tax filing Example. Tax filing In July, a hurricane damaged your home, which cost you $164,000 including land. Tax filing The FMV of the property (both building and land) immediately before the storm was $170,000 and its FMV immediately after the storm was $100,000. Tax filing Your household furnishings were also damaged. Tax filing You separately figured the loss on each damaged household item and arrived at a total loss of $600. Tax filing You collected $50,000 from the insurance company for the damage to your home, but your household furnishings were not insured. Tax filing Your adjusted gross income for the year the hurricane occurred is $65,000. Tax filing You figure your casualty loss deduction from the hurricane in the following manner. Tax filing 1. Tax filing Adjusted basis of real property (cost in this example) $164,000 2. Tax filing FMV of real property before hurricane $170,000 3. Tax filing FMV of real property after hurricane 100,000 4. Tax filing Decrease in FMV of real property (line 2 − line 3) $70,000 5. Tax filing Loss on real property (smaller of line 1 or line 4) $70,000 6. Tax filing Subtract insurance 50,000 7. Tax filing Loss on real property after reimbursement $20,000 8. Tax filing Loss on furnishings $600 9. Tax filing Subtract insurance -0- 10. Tax filing Loss on furnishings after reimbursement $600 11. Tax filing Total loss (line 7 plus line 10) $20,600 12. Tax filing Subtract $100 100 13. Tax filing Loss after $100 rule $20,500 14. Tax filing Subtract 10% of $65,000 AGI 6,500 15. Tax filing Casualty loss deduction $14,000 Property used partly for business and partly for personal purposes. Tax filing   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 portion and for the business or income-producing portion. Tax filing You must figure each loss separately because the losses attributed to these two uses are figured in two different ways. Tax filing When figuring each loss, allocate the total cost or basis, the FMV before and after the casualty or theft loss, and the insurance or other reimbursement between the business and personal use of the property. Tax filing The $100 rule and the 10% rule apply only to the casualty or theft loss on the personal-use portion of the property. Tax filing Example. Tax filing You own a building that you constructed on leased land. Tax filing You use half of the building for your business and you live in the other half. Tax filing The cost of the building was $400,000. Tax filing You made no further improvements or additions to it. Tax filing A flood in March damaged the entire building. Tax filing The FMV of the building was $380,000 immediately before the flood and $320,000 afterwards. Tax filing Your insurance company reimbursed you $40,000 for the flood damage. Tax filing Depreciation on the business part of the building before the flood totaled $24,000. Tax filing Your adjusted gross income for the year the flood occurred is $125,000. Tax filing You have a deductible business casualty loss of $10,000. Tax filing You do not have a deductible personal casualty loss because of the 10% rule. Tax filing You figure your loss as follows. Tax filing     Business   Personal     Part   Part 1. Tax filing Cost (total $400,000) $200,000   $200,000 2. Tax filing Subtract depreciation 24,000   -0- 3. Tax filing Adjusted basis $176,000   $200,000 4. Tax filing FMV before flood (total $380,000) $190,000   $190,000 5. Tax filing FMV after flood (total $320,000) 160,000   160,000 6. Tax filing Decrease in FMV  (line 4 − line 5) $30,000   $30,000 7. Tax filing Loss (smaller of line 3 or line 6) $30,000   $30,000 8. Tax filing Subtract insurance 20,000   20,000 9. Tax filing Loss after reimbursement $10,000   $10,000 10. Tax filing Subtract $100 on personal-use property -0-   100 11. Tax filing Loss after $100 rule $10,000   $9,900 12. Tax filing Subtract 10% of $125,000 AGI on personal-use property -0-   12,500 13. Tax filing Deductible business loss $10,000     14. Tax filing Deductible personal loss $-0- Figuring a Gain If you receive an insurance payment or other reimbursement that is more than your adjusted basis in the destroyed, damaged, or stolen property, you have a gain from the casualty or theft. Tax filing Your gain is figured as follows. Tax filing The amount you receive (discussed next), minus Your adjusted basis in the property at the time of the casualty or theft. Tax filing See Adjusted Basis , earlier, for information on adjusted basis. Tax filing Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain. Tax filing Amount you receive. Tax filing   The amount you receive includes any money plus the value of any property you receive minus any expenses you have in obtaining reimbursement. Tax filing It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Tax filing Example. Tax filing A hurricane destroyed your personal residence and the insurance company awarded you $145,000. Tax filing You received $140,000 in cash. Tax filing The remaining $5,000 was paid directly to the holder of a mortgage on the property. Tax filing The amount you received includes the $5,000 reimbursement paid on the mortgage. Tax filing Main home destroyed. Tax filing   If you have a gain because your main home was destroyed, you generally can exclude the gain from your income as if you had sold or exchanged your home. Tax filing You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Tax filing To exclude a gain, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date it was destroyed. Tax filing For information on this exclusion, see Publication 523. Tax filing If your gain is more than the amount you can exclude, but you buy replacement property, you may be able to postpone reporting the excess gain. Tax filing See Postponement of Gain , later. Tax filing Reporting a gain. Tax filing   You generally must report your gain as income in the year you receive the reimbursement. Tax filing However, you do not have to report your gain if you meet certain requirements and choose to postpone reporting the gain according to the rules explained under Postponement of Gain, next. Tax filing   For information on how to report a gain, see How To Report Gains and Losses , later. Tax filing    If you have a casualty or theft gain on personal-use property that you choose to postpone reporting (as explained next) and you also have another casualty or theft loss on personal-use property, do not consider the gain you are postponing when figuring your casualty or theft loss deduction. Tax filing See 10% Rule under Deduction Limits, earlier. Tax filing Postponement of Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed or stolen property. Tax filing Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Tax filing You must ordinarily report the gain on your stolen or destroyed property if you receive money or unlike property as reimbursement. Tax filing However, you can choose to postpone reporting the gain if you purchase property that is similar or related in service or use to the stolen or destroyed property within a specified replacement period, discussed later. Tax filing You also can choose to postpone reporting the gain if you purchase a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the property. Tax filing See Controlling interest in a corporation , later. Tax filing If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Tax filing To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Tax filing If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement. Tax filing Example. Tax filing In 1970, you bought an oceanfront cottage for your personal use at a cost of $18,000. Tax filing You made no further improvements or additions to it. Tax filing When a storm destroyed the cottage this January, the cottage was worth $250,000. Tax filing You received $146,000 from the insurance company in March. Tax filing You had a gain of $128,000 ($146,000 − $18,000). Tax filing You spent $144,000 to rebuild the cottage. Tax filing Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Tax filing Buying replacement property from a related person. Tax filing   You cannot postpone reporting a gain from a casualty or theft if you buy the replacement property from a related person (discussed later). Tax filing This rule applies to the following taxpayers. Tax filing C corporations. Tax filing Partnerships in which more than 50% of the capital or profits interests is owned by C corporations. Tax filing All others (including individuals, partnerships — other than those in (2) — and S corporations) if the total realized gain for the tax year on all destroyed or stolen properties on which there are realized gains is more than $100,000. Tax filing For casualties and thefts described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. Tax filing If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Tax filing If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Tax filing Exception. Tax filing   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the destroyed or stolen property. Tax filing Related persons. Tax filing   Under this rule, related persons include, for example, a parent and child, a brother and sister, a corporation and an individual who owns more than 50% of its outstanding stock, and two partnerships in which the same C corporations own more than 50% of the capital or profits interests. Tax filing For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Tax filing Death of a taxpayer. Tax filing   If a taxpayer dies after having a gain but before buying replacement property, the gain must be reported for the year in which the decedent realized the gain. Tax filing The executor of the estate or the person succeeding to the funds from the casualty or theft cannot postpone reporting the gain by buying replacement property. Tax filing Replacement Property You must buy replacement property for the specific purpose of replacing your destroyed or stolen property. Tax filing Property you acquire as a gift or inheritance does not qualify. Tax filing You do not have to use the same funds you receive as