You head off for a very enjoyable weekend. Upon returning home, you find the house has been broken into and valuable items taken. As surprising as it might sound, this may raise some tax issues.
Most people carry homeowner's insurance that covers theft losses. If you don't, you are nuts. It doesn't cost much, so go get it. Regardless, insurance will cover the theft losses. In certain situations, however, it won't cover the full loss. You might have a deductible or certain item that simply isn't included in the coverage. This is obviously bad news, but there is a slight benefit from a tax stance, the proverbial silver lining if you will.
You can deduct certain losses derived from thefts. Yes, it is true. There are a host of rules related to doing so, but it is possible. The key is that there must be an actual loss. By this, I mean that you cannot claim a loss for which you've already been compensated. Let's say you are robbed and lose $10,000 is assets. Insurance covers $8,000 of the assets. Your loss for tax purposes would be $2,000.
So, what are these technical requirements for deducting the loss? Well, the first is you can only make the deduction if you itemize. Second, you need to have records supporting the loss including purchase information, police report and so on. To claim a theft loss, you need to fill out IRS Form 4684 and attach it to your annual tax return.
There is another oddity about the theft deduction. You must deduct $100 from the amount of your claim. For the 2009 tax year only, you must deduct $500. These are arbitrary numbers. The total amount will also further be reduced by 10 percent as part of the tax return calculation. Ah, don't you just love the tax code?!
Getting robbed is always a nightmare. The key is to get your insurance compensation first. Then figure out you remaining loss and claim it on your taxes for a nice refund.
