With April 15th looming in the near future, many folks are scrambling to give Uncle Sam a good reason not to confiscate their hard earned pay. And while there are an assortment of arguments and deductions available to the creative taxpayer, an often overlooked one is the deduction for unreimbursed Casualties, Disasters, and Thefts. Insurance doesn't cover everything all the time Psst...come over here...a little closer...I want to tell you a secret. Despite your insurance agent's best efforts, not every claim you file is covered. "No %#@*" you say?!? "I pay all that money in insurance premiums and when (fill in the blank) happens, all I hear is "that's not covered" "Well, thanks for nothing!" We're from the government and we're here to help How many stories end with the IRS riding to the rescue? Well, none actually. However, the IRS can help ease the pain in the case of certain unreimbursed casualty losses. What is a casualty loss? A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Can you give me some examples? Damage to property caused by floods, fires, earthquakes, car accidents, and tornados just to name a few. So what types of losses aren't deductible? Destruction done by a family pet, dropping and breaking fragile items, and anything you intentionally burn up or pay someone to destroy (NO KIDDING!!!) are all not deductible. What if my stuff was stolen? You're still in luck (sort of)! The IRS defines theft as the taking and removing of money or property with the intent to deprive the owner of it. 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. Sounds great! Where do I sign up? Well, before you go getting all misty eyed over your new found affection for the IRS, let's take a deep breath. Like everything involving taxes, there are a few hoops you have to jump through. In June you had a car accident and your car was totaled. You did not carry collision coverage on your car. You paid $18,500 for the car. At the time of the accident the car was worth $17,000. The market value of the car after the accident was $200. Your adjusted gross income for the year the casualty happened is $70,000. You figure your casualty loss deduction as follows: 1. Adjusted basis of car (cost in this example) $18,500 2. Value of car at time of accident $17,000 3. Value of car after the accident $200 4. Decrease in value (line 2 minus line 3) $16,800 5. Loss (smaller of line 1 or 4) $16,800 6. Subtract insurance $0 7. Loss after reimbursement $16,800 8. Subtract $100 $16,700 9. Subtract 10% of $70,000 AGI $7,000 10. TOTAL CASUALTY LOSS DEDUCTION $9,700 Although a $9,700 tax deduction may not be as desirable as a $17,000 check from your insurance company, in this case, it's better than nothing. So the next time you suffer a property loss that's not fully covered by insurance, you may still be elgible for some financial relief. And that could cause you to say something you've never said before "Thank you IRS!"
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