Publication 547 - Casualties,disasters,and Thefts

$100 Rule

a loss of over $100, you are not entitled to any

receive any insurance reimbursement. Your

deduction for these accidents.

loss on the car was $1,200. In November, a fire

damaged your basement and totally destroyed

After you have figured your casualty or theft loss

More than one person. If two or more individ-

the furniture, washer, dryer, and other items you

on personal-use property, as discussed earlier,

uals (other than a husband and wife filing a joint

you must reduce that loss by $100. This reduc-

had stored there. Your loss on the basement

return) have losses from the same casualty or

tion applies to each total casualty or theft loss. It

items after reimbursement was $1,700. Your

theft, the $100 rule applies separately to each

does not matter how many pieces of property

adjusted gross income for the year that the acci-

individual.

are involved in an event. Only a single $100

dent and fire occurred is $25,000. You figure

reduction applies.

your casualty loss deduction as follows.

Example. A fire damaged your house and

also damaged the personal property of your

Example. You have $250 deductible colli-

Car

Basement

house guest. You must reduce your loss by

sion insurance on your car. The car is damaged

$100. Your house guest must reduce his or her

1. Loss . . . . . . . . . . . .

$1,200

$1,700

in a collision. The insurance company pays you

loss by $100.

2. Subtract $100 per

for the damage minus the $250 deductible. The

incident . . . . . . . . .

100

Married taxpayers. If you and your spouse

amount of the casualty loss is based solely on

3. Loss after $100 rule

$1,100

$1,600

file a joint return, you are treated as one individ-

the deductible. The casualty loss is $150 ($250

4. Total loss . . . . . . . . . . . . . . .

$2,700

− $100) because the first $100 of a casualty loss

ual in applying the $100 rule. It does not matter

5. Subtract 10% of $25,000 AGI . .

2,500

whether you own the property jointly or sepa-

on personal-use property is not deductible.

6. Casualty loss deduction . . . .

$200

rately.

If you and your spouse have a casualty or

Single event. Generally, events closely re-

theft loss and you file separate returns, each of

lated in origin cause a single casualty. It is a

Married taxpayers. If you and your spouse

you must reduce your loss by $100. This is true

single casualty when the damage is from two or

file a joint return, you are treated as one individ-

even if you own the property jointly. If one

more closely related causes, such as wind and

ual in applying the 10% rule. It does not matter if

spouse owns the property, only that spouse can

flood damage caused by the same storm. A

you own the property jointly or separately.

figure a loss deduction on a separate return.

single casualty may also damage two or more

If you file separate returns, the 10% rule

If the casualty or theft loss is on property you

pieces of property, such as a hailstorm that

applies to each return on which a loss is

own as tenants by the entirety, each of you can

damages both your home and your car parked in

claimed.

figure your deduction on only one-half of the loss

your driveway.

on separate returns. Neither of you can figure

More than one owner. If two or more individu-

your deduction on the entire loss on a separate

Example 1. A thunderstorm destroyed your

als (other than husband and wife filing a joint

return. Each of you must reduce the loss by

pleasure boat. You also lost some boating

return) have a loss on property that is owned

$100.

equipment in the storm. Your loss was $5,000

jointly, the 10% rule applies separately to each.

on the boat and $1,200 on the equipment. Your

More than one owner. If two or more individu-

insurance company reimbursed you $4,500 for

als (other than a husband and wife filing a joint

Gains and losses. If you have casualty or

the damage to your boat. You had no insurance

return) have a loss on property jointly owned, the

theft gains as well as losses to personal-use

coverage on the equipment. Your casualty loss

$100 rule applies separately to each. For exam-

property, you must compare your total gains to

is from a single event and the $100 rule applies

ple, if two sisters live together in a home they

your total losses. Do this after you have reduced

once. Figure your loss before applying the 10%

own jointly and they have a casualty loss on the

each loss by any reimbursements and by $100

rule (discussed later) as follows.

home, the $100 rule applies separately to each

but before you have reduced the losses by 10%

sister.

of your adjusted gross income.

Boat

Equipment

10% Rule

Casualty or theft gains do not include

1. Loss . . . . . . . . . . . .

$5,000

$1,200

2. Subtract insurance . .

4,500

– 0 –

gains you choose to postpone. See

3. Loss after

You must reduce the total of all your casualty or

Postponement of Gain, later.

CAUTION

reimbursement . . . . .

$500

$1,200

theft losses on personal-use property by 10% of

your adjusted gross income. Apply this rule after

Losses more than gains. If your losses are

4. Total loss . . . . . . . . . . . . . .

$1,700

you reduce each loss by $100. If you have both

5. Subtract $100 . . . . . . . . . . .

100

more than your recognized gains, subtract your

gains and losses from casualties or thefts, see

6. Loss before 10% rule . . . . .

$1,600

gains from your losses and reduce the result by

Gains and losses, later in this discussion.

10% of your adjusted gross income. The rest, if

any, is your deductible loss from personal-use

Example 2. Thieves broke into your home in

Example. In June, you discovered that your

property.

January and stole a ring and a fur coat. You had

house had been burglarized. Your loss after

a loss of $200 on the ring and $700 on the coat.

insurance reimbursement was $2,000. Your ad-

Example. Your theft loss after reducing it by

This is a single theft. The $100 rule applies to

justed gross income for the year you discovered

reimbursements and by $100 is $2,700. Your

the total $900 loss.

the theft is $29,500. Figure your theft loss as

casualty gain is $700. Your loss is more than

follows.

your gain, so you must reduce your $2,000 net

Example 3. In September, hurricane winds

loss ($2,700 − $700) by 10% of your adjusted

blew the roof off your home. Flood waters

1. Loss after insurance . . . . . . . . .

$2,000

gross income.

caused by the hurricane further damaged your

2. Subtract $100 . . . . . . . . . . . . .

100

home and destroyed your furniture and personal

3. Loss after $100 rule . . . . . . . . .

$1,900

Gains more than losses. If your recog-

car. This is considered a single casualty. The

4. Subtract 10% of $29,500 AGI . . .

$2,950

nized gains are more than your losses, subtract

5. Theft loss deduction . . . . . . . .

– 0 –

$100 rule is applied to your total loss from the

your losses from your gains. The difference is

flood waters and the wind.

treated as a capital gain and must be reported

You do not have a theft loss deduction be-

on Schedule D (Form 1040). The 10% rule does

cause your loss ($1,900) is less than 10% of

More than one loss. If you have more than

not apply to your gains.

your adjusted gross income ($2,950).

one casualty or theft loss during your tax year,

you must reduce each loss by $100.

More than one loss. If you have more than

Example. Your theft loss is $600 after re-

one casualty or theft loss during your tax year,

ducing it by reimbursements and by $100. Your

Example. Your family car was damaged in

reduce each loss by any reimbursement and by

casualty gain is $1,600. Because your gain is

an accident in January. Your loss after the insur-

$100. Then you must reduce the total of all your

more than your loss, you must report the $1,000

ance reimbursement was $75. In February, your

losses by 10% of your adjusted gross income.

net capital gain ($1,600 − $600) on Schedule D.

car was damaged in another accident. This time

your loss after the insurance reimbursement

Example. In March, you had a car accident

More information. For information on how

was $90. Apply the $100 rule to each separate

that totally destroyed your car. You did not have

to figure recognized gains, see Figuring a Gain,

casualty loss. Since neither accident resulted in

collision insurance on your car, so you did not

later.

Page 7

Publication 547 - Casualties,disasters,and Thefts - 2002 Page 7

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