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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

TAGS: Home Sense

ERIE® insurance products and services are provided by one or more of the following insurers: Erie Insurance Exchange, Erie Insurance Company, Erie Insurance Property & Casualty Company, Flagship City Insurance Company and Erie Family Life Insurance Company (home offices: Erie, Pennsylvania) or Erie Insurance Company of New York (home office: Rochester, New York).  The companies within the Erie Insurance Group are not licensed to operate in all states. Refer to the company licensure and states of operation information.

The insurance products and rates, if applicable, described in this blog are in effect as of July 2022 and may be changed at any time. 

Insurance products are subject to terms, conditions and exclusions not described in this blog. The policy contains the specific details of the coverages, terms, conditions and exclusions. 

The insurance products and services described in this blog are not offered in all states.  ERIE life insurance and annuity products are not available in New York.  ERIE Medicare supplement products are not available in the District of Columbia or New York.  ERIE long term care products are not available in the District of Columbia and New York. 

Eligibility will be determined at the time of application based upon applicable underwriting guidelines and rules in effect at that time.

Your ERIE agent can offer you practical guidance and answer questions you may have before you buy.