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If you lose property to a fire, storm damage or a thief, you can write off your financial losses on your taxes. You can't take a deduction for anything your insurance pays for. If, say, a storm destroys your $200,000 house and you get $200,000 back, you have no write-off. You can claim whatever the insurance doesn't pay for, though, and that figure includes whatever you paid in deductibles.
Unfortunately, you can't subtract your insurance check from the size of your loss and write the result on your 1040 Form. First you figure out how much the value of your property dropped due to whatever catastrophe struck. For purposes of calculating a tax deduction, however, this figure can't be greater than the adjusted basis of your home -- that is, its value just before the loss occurred, based on the original purchase price, adjusted for improvements and depreciation.
Take the loss in value to your home -- or your adjusted basis, if that's smaller -- and subtract whatever reimbursement you got from your insurer. This figure, which accounts for any deductibles you paid out of pocket, gives you the amount of your loss. If you don't get your insurance payment before taxes are due, ask your insurer for an estimate and use that figure in your calculations. If the payment ends up being more or less than the estimate, you report the difference on your taxes for the year you finally get the check.
The amount of your loss, however, isn't what you get to deduct. First, you subtract $100 from each loss you report for the year. If, say, you lost $1,000 on your home and $500 on your rental house in separate events, you can only claim $900 and $400. If you co-own property with someone other than a spouse, you each subtract $100 from the loss. Then add all these losses together and subtract 10 percent. Continuing the example, you'd add $900 and $400 and subtract $130, yielding $1,170. That's the figure you use to calculate your deduction on Schedule A.
You report casualty, theft and disaster losses on Schedule A, for itemized deductions. If you take the standard deduction, there's no write-off for personal property. If you do itemize, property losses are 2 percent deductions, along with such other expenses as unreimbursed employee expenses and investment expenses. You add all such deductions together and subtract 2 percent of your adjusted gross income. The remainder is what you get to write off on taxes. If these deductions add up to less than 2 percent of your AGI, you write off zero.
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