Things You'll Need:
- IRS Form 4684
- IRS Form schedule A
- Personal time
- Receipts or proof of losses
-
Step 1
Determine if your losses qualify. The IRS has strict standards on what can and can not be considered a loss. The IRS states that, “Damage, destruction or loss of property resulting from a sudden, unexpected or unusual event; the losses can result from natural or man-made disasters.” For more information on what you can deduct on losses visit the supplied URL link below.
-
Step 2
Determine your total losses. In order to claim a deduction you must determine your losses first. These are the IRS rules: take your total loss and minus $100 from it as well as any insurance money that was recuperated. The remainder must be at least 10% of your AGI (Adjusted Gross Income) or you can not deduct that loss.
-
Step 3
Now determine what portion of the loss you can write off. Let’s say that you had a loss of $10,000, and your AGI was $80,000. You minus the $100 from the $10,000 automatically giving you $9,900; then you take ten percent of your AGI and subtract that. In this case it would be $8,000. Finally you also minus any insurance payouts, and let us pretend that you got back $1,000 from the insurance company.
-
Step 4
Do the math and reach your final deduction amount. So this is how your math would read: loss of $10,000 minus ten percent of AGI ($8,000) equals $2,000. Now subtract the mandatory $100 as well as the insurance payout of $1,000 and you have the true loss deduction, which in this case would be $900.
-
Step 5
Fill out the proper forms and attach them to your return. You will need the IRS Form 4684 and IRS Form schedule A to fill out your casualty losses. Make sure that you attach these forms to your 1040 before mailing it in to the IRS.
