What Can You Claim on Your Taxes After a Burglary?
When you suffer a loss caused by theft, vandalism or another type of accident---including burglary---you may be able to take a deduction on your federal tax return. There are some limitations on how much of the loss is deductible for personal property; these limits do not apply to business or income-producing property.
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Qualified Losses
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The IRS defines theft as "the taking and removing of money or property with the intent to deprive the owner of it." This would include burglary along with robbery, fraud and embezzlement. To qualify, there must have been criminal intent involved but an arrest or conviction is not necessary. You do, however, need to be able to show that a theft took place and that you were the owner of the property. A police report is typically sufficient proof.
Determining Amount of Loss
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To determine your deduction for a burglary you must first calculate the total amount of the loss. Start by identifying and adding up the "adjusted basis" of all the stolen property. The basis is the price you paid for an item or its value when you received it through some other method. You will need records to prove that value. If any of your property was damaged but not taken during the burglary, the difference between its original value and its fair market value after being damaged is also considered a loss. Finally, subtract any insurance payments you receive or expect to receive. That final figure is the total amount of your theft loss.
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Deduction Limits
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A loss on personal property is subject to several limitations, so there are several additional calculations you must do to determine how much of the loss is deductible. First, the total amount of the loss from each theft event must be reduced by $500. Then, the total of all your casualty and theft losses for the year must be reduced by 10 percent of your adjusted gross income. For example, let's say your house was burglarized. The basis of the stolen items totaled $8,000 and you received $4,000 in insurance reimbursements, for a total loss of $4,000. You then subtract $500 and come up with a theft loss of $3,500. Assuming your adjusted gross income (AGI) for the year was $30,000, you would subtract 10 percent of that ($3,000) from the $3,500 for a loss amount of $500. If you have more than one casualty or theft loss during the tax year, the 10 percent AGI reduction is taken from the total of all losses for the year, not each loss. The total of all your theft and casualty losses for the year is entered along with any other "miscellaneous itemized deductions" on your return, which are deductible to the extent the total amount exceeds 2 percent of your AGI.
Forms to File
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When you have a casualty or theft loss, you must file Form 4684 with your tax return. This form has separate lines for determining and entering the $500 and 10 percent of AGI reductions. The final figure from Form 4684 is then transferred to Schedule A for reporting as an itemized deduction. If the theft affected business property you own, you may need to file Form 4797 as well.
Property Used for Personal and Business Purposes
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When you have a theft loss on property used for personal as well as business purposes, you need to figure the deduction separately for each portion. That's because the personal portion is subject to the $500 and 10 percent of AGI reductions while the business portion is not. Prorate the adjusted basis, any decrease in fair market value and reimbursements received based on a percentage of time used for each purpose and then figure the loss on each portion separately.
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