Deduct Insurance Claim on Your Tax Return
Posted by Joe Brennan | Posted in Fire Insurance Claims, Homeowners Insurance, Insurance Advice, Insurance Claims Help | Posted on 04-30-2013
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INSURANCE CLAIMS ARE DEDUCTIBLE: If you suffered a insurance loss to your property and have not been fully reimbursed by your insurance company, you can file Tax Form 4684 and deduct the loss from your taxes. And, yes, parts of your loss that is not covered by insurance is still deductible… whether you had insurance or not.
Under the law, a personal casualty loss is determined by taking the smaller of:
- The cost or other basis of the property (reduced by any insurance reimbursement), or
- The decline in fair market value of the property as measured immediately before and after the casualty (reduced by any insurance reimbursement) (This is the one most should use.)
The cost of repairs may, in certain cases, be used to measure the decline in fair market value, but it cannot be used by itself to determine the amount of the loss. When the cost of repairs is determined to be a fair measure of the decline in fair market value, then all you have to do is take the fair market value before the casualty and reduce it by the cost of repairs to arrive at the fair market value after the casualty.
Losses You Can Deduct: You can deduct losses of property from fire, storm, shipwreck, or other casualty, or theft (for example, larceny, embezzlement, and robbery). If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Otherwise, you cannot deduct the loss as a casualty or theft loss. However, the part of the loss that is not covered by insurance is still deductible.
Related expenses: The related expenses you have due to a casualty or theft, such as expenses for the treatment of personal
injuries or for the rental of a car, are not deductible as casualty or theft losses.
Here is a link to the form. Speak with your accountant – And, if you already filed and missed this deduction, you can still amend your return. Good Luck – http://www.irs.gov/pub/irs-pdf/i4684.pdf
For Hurricane Sandy victims, NY State has directions on how to claim the loss on your state taxes as well (http://www.tax.ny.gov/pit/file/sandydeduction.htm). It’s not too late to file your property damage loss either – even if you have already completed your tax return. It can be amended, sometimes years after the loss took place.
This is a very unknown topic to policyholders. In two weeks this post was viewed on FaceBook over 18,000 times. https://www.facebook.com/insuranceclaimsgroup/posts/579868142033862
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