The Tax Deductions for a Loss Due to a Crime

Losses due to crime can pose immense financial hardships, and the Internal Revenue Service recognizes this by allowing taxpayers to deduct crime-victim expenses on their tax returns. The crime generally must have occurred in the year for which you are filing taxes, and you may need to consult an accountant who can help you properly itemize -- and maximize -- your deductions.

Property Loss

Theft is among the most common crimes, and even if someone fails to steal your property, he may damage it. Thieves who break into your home might damage the door, break electronics or otherwise destroy your property. You can deduct the loss in value of the property or the cost of replacement. If you choose to have it repaired, deduct the cost of repairs. You may also deduct the cost of any diminished value that a repaired item has suffered. For example, if the value of your car goes down -- even after repairs -- due to a break-in attempt, you may deduct this sum.

Financial Crimes

You can typically deduct the costs of financial crimes, including petty theft. If your bank account is compromised or your cash is stolen, you can deduct the amount that was taken. Victims of white collar financial crimes can usually deduct the costs of loss of stocks or other financial assets caused by the crime.

Medical Expenses

Crime sometimes involves physical or psychological harm. The IRS allows people to deduct medical expenses that exceed a percentage of your adjusted gross income, and you can also deduct medical expenses associated with victimization. If you have to buy medical equipment such as crutches or prescription drugs as a result of your injuries, you may deduct the cost of these items.

Filing Your Deductions

Itemize your crime-related deductions on Schedule A of your 1040. Retain any receipts, repair bills or medical records, because you will need to provide these if you are audited. You can't deduct items for which insurance has paid; if insurance has covered part of the cost, you can deduct the remaining cost. Avoid overvaluing anything that is stolen or damaged; values should be based on an appraisal or recent receipt.

Photo Credits

  • Form 1040 Tax Forms image by Viola Joyner from Fotolia.com

About the Author

Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.

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