Publication 547 - Casualties, Disasters, And Thefts - Department Of Treasury

Employee property is property used in perform-

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

Example. In March, you had a car accident

ing services as an employee.

that totally destroyed your car. You did not have

casualty loss. Since neither accident resulted in

collision insurance on your car, so you did not

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

$100 Rule

receive any insurance reimbursement. Your

deduction for these accidents.

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

More than one person. If two or more individ-

damaged your basement and totally destroyed

After you have figured your casualty or theft loss

uals (other than a husband and wife filing a joint

the furniture, washer, dryer, and other items you

on personal-use property, as discussed earlier,

return) have losses from the same casualty or

had stored there. Your loss on the basement

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

theft, the $100 rule applies separately to each

items after reimbursement was $1,700. Your

tion applies to each total casualty or theft loss. It

individual.

adjusted gross income for the year that the acci-

does not matter how many pieces of property

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

are involved in an event. Only a single $100

Example. A fire damaged your house and

your casualty loss deduction as follows.

reduction applies.

also damaged the personal property of your

Car

Basement

house guest. You must reduce your loss by

Example. You have $250 deductible colli-

$100. Your house guest must reduce his or her

sion insurance on your car. The car is damaged

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

$1,200

$1,700

loss by $100.

in a collision. The insurance company pays you

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

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

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

$2,700

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

whether you own the property jointly or sepa-

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

2,500

on personal-use property is not deductible.

rately.

6. Casualty loss deduction . . . .

$ 200

Single event. Generally, events closely re-

If you and your spouse have a casualty or

Married taxpayers. If you and your spouse

lated in origin cause a single casualty. It is a

theft loss and you file separate returns, each of

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

single casualty when the damage is from two or

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

more closely related causes, such as wind and

even if you own the property jointly. If one

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

flood damage caused by the same storm. A

spouse owns the property, only that spouse can

you own the property jointly or separately.

single casualty may also damage two or more

If you file separate returns, the 10% rule

figure a loss deduction on a separate return.

pieces of property, such as a hailstorm that

applies to each return on which a loss is

If the casualty or theft loss is on property you

damages both your home and your car parked in

claimed.

own as tenants by the entirety, each of you can

your driveway.

figure your deduction on only one-half of the loss

More than one owner. If two or more individu-

on separate returns. Neither of you can figure

als (other than husband and wife filing a joint

Example 1. A thunderstorm destroyed your

your deduction on the entire loss on a separate

return) have a loss on property that is owned

pleasure boat. You also lost some boating

return. Each of you must reduce the loss by

jointly, the 10% rule applies separately to each.

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

$100.

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

Gains and losses. If you have casualty or

insurance company reimbursed you $4,500 for

More than one owner. If two or more individu-

theft gains as well as losses to personal-use

the damage to your boat. You had no insurance

als (other than a husband and wife filing a joint

property, you must compare your total gains to

coverage on the equipment. Your casualty loss

return) have a loss on property jointly owned, the

your total losses. Do this after you have reduced

is from a single event and the $100 rule applies

$100 rule applies separately to each. For exam-

each loss by any reimbursements and by $100

once. Figure your loss before applying the 10%

ple, if two sisters live together in a home they

but before you have reduced the losses by 10%

rule (discussed later) as follows.

own jointly and they have a casualty loss on the

of your adjusted gross income.

home, the $100 rule applies separately to each

Casualty or theft gains do not include

Boat

Equipment

sister.

gains you choose to postpone. See

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

$5,000

$1,200

Postponement of Gain, later.

CAUTION

10% Rule

2. Subtract insurance . .

4,500

– 0 –

3. Loss after

Losses more than gains. If your losses are

reimbursement . . . . .

$ 500

$1,200

You must reduce the total of all your casualty or

more than your recognized gains, subtract your

theft losses on personal-use property by 10% of

gains from your losses and reduce the result by

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

$1,700

your adjusted gross income. Apply this rule after

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

100

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

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

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

$1,600

any, is your deductible loss from personal-use

gains and losses from casualties or thefts, see

property.

Gains and losses, later in this discussion.

Example 2. Thieves broke into your home in

Example. Your theft loss after reducing it by

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

Example. In June, you discovered that your

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

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

house had been burglarized. Your loss after

casualty gain is $700. Your loss is more than

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

insurance reimbursement was $2,000. Your ad-

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

the total $900 loss.

justed gross income for the year you discovered

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

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

gross income.

Example 3. In September, hurricane winds

follows.

blew the roof off your home. Flood waters

Gains more than losses. If your recog-

caused by the hurricane further damaged your

nized gains are more than your losses, subtract

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

$2,000

home and destroyed your furniture and personal

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

100

your losses from your gains. The difference is

car. This is considered a single casualty. The

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

$1,900

treated as a capital gain and must be reported

$100 rule is applied to your total loss from the

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

$2,950

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

flood waters and the wind.

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

-0-

not apply to your gains.

More than one loss. If you have more than

You do not have a theft loss deduction be-

Example. Your theft loss is $600 after re-

one casualty or theft loss during your tax year,

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

ducing it by reimbursements and by $100. Your

you must reduce each loss by $100.

your adjusted gross income ($2,950).

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

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

More than one loss. If you have more than

Example. Your family car was damaged in

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

one casualty or theft loss during your tax year,

an accident in January. Your loss after the insur-

reduce each loss by any reimbursement and by

ance reimbursement was $75. In February, your

More information. For information on how

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

car was damaged in another accident. This time

to figure recognized gains, see Figuring a Gain,

your loss after the insurance reimbursement

losses by 10% of your adjusted gross income.

later.

Page 7

Publication 547 - Casualties, Disasters, And Thefts - Department Of Treasury - 2004 Page 7

Related Articles

Related forms

Related Categories