Tax Deductions for Unreimbursed Losses
The U.S. tax code allows tax deductions for unreimbursed losses to be included among itemized deductions. So if your home, car or boat was damaged or destroyed by a windstorm, fire, flood, vandalism or other sudden and unexpected disaster, and it was not entirely covered by your insurance, you may be able to deduct a portion of the loss on your federal income tax return.
To qualify for tax deductions for unreimbursed losses, these losses usually need to be substantial. If you were significantly underinsured or had a large catastrophe deductible, you may have a sizable unreimbursed casualty loss.
Generally, an unreimbursed loss can be deducted to the extent it exceeds 10 percent of a homeowner’s adjusted gross income, less $100. If a property is used in a trade or business, slightly different rules may apply. In this case, it is important to seek assistance from a qualified tax preparer.
Preparing tax deductions for unreimbursed losses
To determine whether you qualify for the deduction, you will first need to substantiate your property loss. So be sure to collect all receipts, insurance statements and any available police reports or other documentation to present to your tax preparer.
In regions where there has been a federally declared disaster, the deduction can either be filed for the year in which the disaster occurred or for the year immediately preceding the year the disaster occurred.
For more information, review the Casualty, Disaster and Theft Losses (including Federally Declared Disaster Areas) section of the Internal Revenue Service’s (IRS) website.
Article source: Insurance Information Institute