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Amending Tax Return Turbotax

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Amending Tax Return Turbotax

Amending tax return turbotax 18. Amending tax return turbotax   Alimony Table of Contents IntroductionSpouse or former spouse. Amending tax return turbotax Divorce or separation instrument. Amending tax return turbotax Useful Items - You may want to see: General RulesMortgage payments. Amending tax return turbotax Taxes and insurance. Amending tax return turbotax Other payments to a third party. Amending tax return turbotax Instruments Executed After 1984Payments to a third party. Amending tax return turbotax Exception. Amending tax return turbotax Substitute payments. Amending tax return turbotax Specifically designated as child support. Amending tax return turbotax Contingency relating to your child. Amending tax return turbotax Clearly associated with a contingency. Amending tax return turbotax How To Deduct Alimony Paid How To Report Alimony Received Recapture Rule Introduction This chapter discusses the rules that apply if you pay or receive alimony. Amending tax return turbotax It covers the following topics. Amending tax return turbotax What payments are alimony. Amending tax return turbotax What payments are not alimony, such as child support. Amending tax return turbotax How to deduct alimony you paid. Amending tax return turbotax How to report alimony you received as income. Amending tax return turbotax Whether you must recapture the tax benefits of alimony. Amending tax return turbotax Recapture means adding back in your income all or part of a deduction you took in a prior year. Amending tax return turbotax Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. Amending tax return turbotax It does not include voluntary payments that are not made under a divorce or separation instrument. Amending tax return turbotax Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Amending tax return turbotax Although this chapter is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. Amending tax return turbotax To be alimony, a payment must meet certain requirements. Amending tax return turbotax Different requirements generally apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. Amending tax return turbotax This chapter discusses the rules for payments under instruments executed after 1984. Amending tax return turbotax If you need the rules for payments under pre-1985 instruments, get and keep a copy of the 2004 version of Publication 504. Amending tax return turbotax That was the last year the information on pre-1985 instruments was included in Publication 504. Amending tax return turbotax Use Table 18-1 in this chapter as a guide to determine whether certain payments are considered alimony. Amending tax return turbotax Definitions. Amending tax return turbotax   The following definitions apply throughout this chapter. Amending tax return turbotax Spouse or former spouse. Amending tax return turbotax   Unless otherwise stated, the term “spouse” includes former spouse. Amending tax return turbotax Divorce or separation instrument. Amending tax return turbotax   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. Amending tax return turbotax This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). Amending tax return turbotax Useful Items - You may want to see: Publication 504 Divorced or Separated Individuals General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. Amending tax return turbotax Payments not alimony. Amending tax return turbotax   Not all payments under a divorce or separation instrument are alimony. Amending tax return turbotax Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained under Community Property in Publication 504, Payments to keep up the payer's property, or Use of the payer's property. Amending tax return turbotax Payments to a third party. Amending tax return turbotax   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. Amending tax return turbotax These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. Amending tax return turbotax ), taxes, tuition, etc. Amending tax return turbotax The payments are treated as received by your spouse and then paid to the third party. Amending tax return turbotax Life insurance premiums. Amending tax return turbotax   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. Amending tax return turbotax Payments for jointly-owned home. Amending tax return turbotax   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse, some of your payments may be alimony. Amending tax return turbotax Mortgage payments. Amending tax return turbotax   If you must pay all the mortgage payments (principal and interest) on a jointly-owned home, and they otherwise qualify as alimony, you can deduct one-half of the total payments as alimony. Amending tax return turbotax If you itemize deductions and the home is a qualified home, you can claim one-half of the interest in figuring your deductible interest. Amending tax return turbotax Your spouse must report one-half of the payments as alimony received. Amending tax return turbotax If your spouse itemizes deductions and the home is a qualified home, he or she can claim one-half of the interest on the mortgage in figuring deductible interest. Amending tax return turbotax Taxes and insurance. Amending tax return turbotax   If you must pay all the real estate taxes or insurance on a home held as tenants in common, you can deduct one-half of these payments as alimony. Amending tax return turbotax Your spouse must report one-half of these payments as alimony received. Amending tax return turbotax If you and your spouse itemize deductions, you can each claim one-half of the real estate taxes and none of the home insurance. Amending tax return turbotax    If your home is held as tenants by the entirety or joint tenants, none of your payments for taxes or insurance are alimony. Amending tax return turbotax But if you itemize deductions, you can claim all of the real estate taxes and none of the home insurance. Amending tax return turbotax Other payments to a third party. Amending tax return turbotax   If you made other third-party payments, see Publication 504 to see whether any part of the payments qualifies as alimony. Amending tax return turbotax Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. Amending tax return turbotax Exception for instruments executed before 1985. Amending tax return turbotax   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. Amending tax return turbotax A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. Amending tax return turbotax A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. Amending tax return turbotax   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, get the 2004 version of Publication 504 at www. Amending tax return turbotax irs. Amending tax return turbotax gov/pub504. Amending tax return turbotax Example 1. Amending tax return turbotax In November 1984, you and your former spouse executed a written separation agreement. Amending tax return turbotax In February 1985, a decree of divorce was substituted for the written separation agreement. Amending tax return turbotax The decree of divorce did not change the terms for the alimony you pay your former spouse. Amending tax return turbotax The decree of divorce is treated as executed before 1985. Amending tax return turbotax Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. Amending tax return turbotax Example 2. Amending tax return turbotax Assume the same facts as in Example 1 except that the decree of divorce changed the amount of the alimony. Amending tax return turbotax In this example, the decree of divorce is not treated as executed before 1985. Amending tax return turbotax The alimony payments are subject to the rules for payments under instruments executed after 1984. Amending tax return turbotax Alimony requirements. Amending tax return turbotax   A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. Amending tax return turbotax The payment is in cash. Amending tax return turbotax The instrument does not designate the payment as not alimony. Amending tax return turbotax Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. Amending tax return turbotax There is no liability to make any payment (in cash or property) after the death of the recipient spouse. Amending tax return turbotax The payment is not treated as child support. Amending tax return turbotax Each of these requirements is discussed below. Amending tax return turbotax Cash payment requirement. Amending tax return turbotax   Only cash payments, including checks and money orders, qualify as alimony. Amending tax return turbotax The following do not qualify as alimony. Amending tax return turbotax Transfers of services or property (including a debt instrument of a third party or an annuity contract). Amending tax return turbotax Execution of a debt instrument by the payer. Amending tax return turbotax The use of the payer's property. Amending tax return turbotax Payments to a third party. Amending tax return turbotax   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. Amending tax return turbotax See Payments to a third party under General Rules, earlier. Amending tax return turbotax   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. Amending tax return turbotax The payments are in lieu of payments of alimony directly to your spouse. Amending tax return turbotax The written request states that both spouses intend the payments to be treated as alimony. Amending tax return turbotax You receive the written request from your spouse before you file your return for the year you made the payments. Amending tax return turbotax Payments designated as not alimony. Amending tax return turbotax   You and your spouse can designate that otherwise qualifying payments are not alimony. Amending tax return turbotax You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. Amending tax return turbotax For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). Amending tax return turbotax If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Amending tax return turbotax   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. Amending tax return turbotax The copy must be attached each year the designation applies. Amending tax return turbotax Spouses cannot be members of the same household. Amending tax return turbotax    Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. Amending tax return turbotax A home you formerly shared is considered one household, even if you physically separate yourselves in the home. Amending tax return turbotax   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. Amending tax return turbotax Exception. Amending tax return turbotax   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. Amending tax return turbotax Table 18-1. Amending tax return turbotax Alimony Requirements (Instruments Executed After 1984) Payments ARE alimony if all of the following are true: Payments are NOT alimony if any of the following are true: Payments are required by a divorce or separation instrument. Amending tax return turbotax Payments are not required by a divorce or separation instrument. Amending tax return turbotax Payer and recipient spouse do not file a joint return with each other. Amending tax return turbotax Payer and recipient spouse file a joint return with each other. Amending tax return turbotax Payment is in cash (including checks or money orders). Amending tax return turbotax Payment is: Not in cash, A noncash property settlement, Spouse's part of community income, or To keep up the payer's property. Amending tax return turbotax Payment is not designated in the instrument as not alimony. Amending tax return turbotax Payment is designated in the instrument as not alimony. Amending tax return turbotax Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. Amending tax return turbotax Spouses legally separated under a decree of divorce or separate maintenance are members of the same household. Amending tax return turbotax Payments are not required after death of the recipient spouse. Amending tax return turbotax Payments are required after death of the recipient spouse. Amending tax return turbotax Payment is not treated as child support. Amending tax return turbotax Payment is treated as child support. Amending tax return turbotax These payments are deductible by the payer and includible in income by the recipient. Amending tax return turbotax These payments are neither deductible by the payer nor includible in income by the recipient. Amending tax return turbotax Liability for payments after death of recipient spouse. Amending tax return turbotax   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony, whether made before or after the death. Amending tax return turbotax If all of the payments would continue, then none of the payments made before or after the death are alimony. Amending tax return turbotax   The divorce or separation instrument does not have to expressly state that the payments cease upon the death of your spouse if, for example, the liability for continued payments would end under state law. Amending tax return turbotax Example. Amending tax return turbotax You must pay your former spouse $10,000 in cash each year for 10 years. Amending tax return turbotax Your divorce decree states that the payments will end upon your former spouse's death. Amending tax return turbotax You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. Amending tax return turbotax The death of your spouse would not terminate these payments under state law. Amending tax return turbotax The $10,000 annual payments may qualify as alimony. Amending tax return turbotax The $20,000 annual payments that do not end upon your former spouse's death are not alimony. Amending tax return turbotax Substitute payments. Amending tax return turbotax   If you must make any payments in cash or property after your spouse's death as a substitute for continuing otherwise qualifying payments before the death, the otherwise qualifying payments are not alimony. Amending tax return turbotax To the extent that your payments begin, accelerate, or increase because of the death of your spouse, otherwise qualifying payments you made may be treated as payments that were not alimony. Amending tax return turbotax Whether or not such payments will be treated as not alimony depends on all the facts and circumstances. Amending tax return turbotax Example 1. Amending tax return turbotax Under your divorce decree, you must pay your former spouse $30,000 annually. Amending tax return turbotax The payments will stop at the end of 6 years or upon your former spouse's death, if earlier. Amending tax return turbotax Your former spouse has custody of your minor children. Amending tax return turbotax The decree provides that if any child is still a minor at your spouse's death, you must pay $10,000 annually to a trust until the youngest child reaches the age of majority. Amending tax return turbotax The trust income and corpus (principal) are to be used for your children's benefit. Amending tax return turbotax These facts indicate that the payments to be made after your former spouse's death are a substitute for $10,000 of the $30,000 annual payments. Amending tax return turbotax Of each of the $30,000 annual payments, $10,000 is not alimony. Amending tax return turbotax Example 2. Amending tax return turbotax Under your divorce decree, you must pay your former spouse $30,000 annually. Amending tax return turbotax The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. Amending tax return turbotax The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. Amending tax return turbotax For example, if your spouse dies at the end of the tenth year, you must pay the estate $150,000 ($450,000 − $300,000). Amending tax return turbotax These facts indicate that the lump-sum payment to be made after your former spouse's death is a substitute for the full amount of the $30,000 annual payments. Amending tax return turbotax None of the annual payments are alimony. Amending tax return turbotax The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment. Amending tax return turbotax Child support. Amending tax return turbotax   A payment that is specifically designated as child support or treated as specifically designated as child support under your divorce or separation instrument is not alimony. Amending tax return turbotax The amount of child support may vary over time. Amending tax return turbotax Child support payments are not deductible by the payer and are not taxable to the recipient. Amending tax return turbotax Specifically designated as child support. Amending tax return turbotax   A payment will be treated as specifically designated as child support to the extent that the payment is reduced either: On the happening of a contingency relating to your child, or At a time that can be clearly associated with the contingency. Amending tax return turbotax A payment may be treated as specifically designated as child support even if other separate payments are specifically designated as child support. Amending tax return turbotax Contingency relating to your child. Amending tax return turbotax   A contingency relates to your child if it depends on any event relating to that child. Amending tax return turbotax It does not matter whether the event is certain or likely to occur. Amending tax return turbotax Events relating to your child include the child's: Becoming employed, Dying, Leaving the household, Leaving school, Marrying, or Reaching a specified age or income level. Amending tax return turbotax Clearly associated with a contingency. Amending tax return turbotax   Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations. Amending tax return turbotax The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority. Amending tax return turbotax The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. Amending tax return turbotax This certain age must be the same for each child, but need not be a whole number of years. Amending tax return turbotax In all other situations, reductions in payments are not treated as clearly associated with the happening of a contingency relating to your child. Amending tax return turbotax   Either you or the IRS can overcome the presumption in the two situations above. Amending tax return turbotax This is done by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to your children. Amending tax return turbotax For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period equal to one-half of the duration of the marriage, you can overcome the presumption and may be able to treat the amount as alimony. Amending tax return turbotax How To Deduct Alimony Paid You can deduct alimony you paid, whether or not you itemize deductions on your return. Amending tax return turbotax You must file Form 1040. Amending tax return turbotax You cannot use Form 1040A or Form 1040EZ. Amending tax return turbotax Enter the amount of alimony you paid on Form 1040, line 31a. Amending tax return turbotax In the space provided on line 31b, enter your spouse's social security number (SSN) or individual taxpayer identification number (ITIN). Amending tax return turbotax If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Amending tax return turbotax Show the SSN or ITIN and amount paid to each other recipient on an attached statement. Amending tax return turbotax Enter your total payments on line 31a. Amending tax return turbotax You must provide your spouse's SSN or ITIN. Amending tax return turbotax If you do not, you may have to pay a $50 penalty and your deduction may be disallowed. Amending tax return turbotax For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Amending tax return turbotax How To Report Alimony Received Report alimony you received as income on Form 1040, line 11. Amending tax return turbotax You cannot use Form 1040A or Form 1040EZ. Amending tax return turbotax You must give the person who paid the alimony your SSN or ITIN. Amending tax return turbotax If you do not, you may have to pay a $50 penalty. Amending tax return turbotax Recapture Rule If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. Amending tax return turbotax If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Amending tax return turbotax Your spouse can deduct in the third year part of the alimony payments he or she previously included in income. Amending tax return turbotax The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. Amending tax return turbotax Do not include any time in which payments were being made under temporary support orders. Amending tax return turbotax The second and third years are the next 2 calendar years, whether or not payments are made during those years. Amending tax return turbotax The reasons for a reduction or end of alimony payments that can require a recapture include: A change in your divorce or separation instrument, A failure to make timely payments, A reduction in your ability to provide support, or A reduction in your spouse's support needs. Amending tax return turbotax When to apply the recapture rule. Amending tax return turbotax   You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year. Amending tax return turbotax   When you figure a decrease in alimony, do not include the following amounts. Amending tax return turbotax Payments made under a temporary support order. Amending tax return turbotax Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment. Amending tax return turbotax Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year. Amending tax return turbotax Figuring the recapture. Amending tax return turbotax   You can use Worksheet 1 in Publication 504 to figure recaptured alimony. Amending tax return turbotax Including the recapture in income. Amending tax return turbotax   If you must include a recapture amount in income, show it on Form 1040, line 11 (“Alimony received”). Amending tax return turbotax Cross out “received” and enter “recapture. Amending tax return turbotax ” On the dotted line next to the amount, enter your spouse's last name and SSN or ITIN. Amending tax return turbotax Deducting the recapture. Amending tax return turbotax   If you can deduct a recapture amount, show it on Form 1040, line 31a (“Alimony paid”). Amending tax return turbotax Cross out “paid” and enter “recapture. Amending tax return turbotax ” In the space provided, enter your spouse's SSN or ITIN. Amending tax return turbotax Prev  Up  Next   Home   More Online Publications
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The Amending Tax Return Turbotax

Amending tax return turbotax 25. Amending tax return turbotax   Nonbusiness Casualty and Theft Losses Table of Contents What's New Introduction Useful Items - You may want to see: CasualtyFamily pet. Amending tax return turbotax Progressive deterioration. Amending tax return turbotax Damage from corrosive drywall. Amending tax return turbotax Theft Loss on Deposits Proof of Loss Figuring a LossDecrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Single Casualty on Multiple Properties Deduction Limits$100 Rule 10% Rule When To Report Gains and LossesDisaster Area Loss How To Report Gains and Losses What's New New Section C of Form 4684 for Ponzi-type investment schemes. Amending tax return turbotax  Section C of Form 4684 is new for 2013. Amending tax return turbotax You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. Amending tax return turbotax Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Amending tax return turbotax You do not need to complete Appendix A. Amending tax return turbotax For details, see Losses from Ponzi-type investment schemes , in this chapter. Amending tax return turbotax Introduction This chapter explains the tax treatment of personal (not business or investment related) casualty losses, theft losses, and losses on deposits. Amending tax return turbotax The chapter also explains the following  topics. Amending tax return turbotax How to figure the amount of your loss. Amending tax return turbotax How to treat insurance and other reimbursements you receive. Amending tax return turbotax The deduction limits. Amending tax return turbotax When and how to report a casualty or theft. Amending tax return turbotax Forms to file. Amending tax return turbotax    When you have a casualty or theft, you have to file Form 4684. Amending tax return turbotax You will also have to file one or more of the following forms. Amending tax return turbotax Schedule A (Form 1040), Itemized Deductions Schedule D (Form 1040), Capital Gains and Losses Condemnations. Amending tax return turbotax   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Disposition of Assets. Amending tax return turbotax Workbook for casualties and thefts. Amending tax return turbotax    Publication 584 is available to help you make a list of your stolen or damaged personal-use property and figure your loss. Amending tax return turbotax It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Amending tax return turbotax Business or investment-related losses. Amending tax return turbotax   For information on a casualty or theft loss of business or income-producing property, see Publication 547, Casualties, Disasters, and Thefts. Amending tax return turbotax Useful Items - You may want to see: Publication 544 Sales and Other Dispositions  of Assets 547 Casualties, Disasters, and   Thefts 584 Casualty, Disaster, and Theft   Loss Workbook (Personal-Use  Property) Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Amending tax return turbotax A sudden event is one that is swift, not gradual or progressive. Amending tax return turbotax An unexpected event is one that is ordinarily unanticipated and unintended. Amending tax return turbotax An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Amending tax return turbotax Deductible losses. Amending tax return turbotax   Deductible casualty losses can result from a number of different causes, including the following. Amending tax return turbotax Car accidents (but see Nondeductible losses , next, for exceptions). Amending tax return turbotax Earthquakes. Amending tax return turbotax Fires (but see Nondeductible losses , next, for exceptions). Amending tax return turbotax Floods. Amending tax return turbotax Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses in Publication 547. Amending tax return turbotax Mine cave-ins. Amending tax return turbotax Shipwrecks. Amending tax return turbotax Sonic booms. Amending tax return turbotax Storms, including hurricanes and tornadoes. Amending tax return turbotax Terrorist attacks. Amending tax return turbotax Vandalism. Amending tax return turbotax Volcanic eruptions. Amending tax return turbotax Nondeductible losses. Amending tax return turbotax   A casualty loss is not deductible if the damage or destruction is caused by the following. Amending tax return turbotax Accidentally breaking articles such as glassware or china under normal conditions. Amending tax return turbotax A family pet (explained below). Amending tax return turbotax A fire if you willfully set it or pay someone else to set it. Amending tax return turbotax A car accident if your willful negligence or willful act caused it. Amending tax return turbotax The same is true if the willful act or willful negligence of someone acting for you caused the accident. Amending tax return turbotax Progressive deterioration (explained later). Amending tax return turbotax Family pet. Amending tax return turbotax   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. Amending tax return turbotax Example. Amending tax return turbotax Your antique oriental rug was damaged by your new puppy before it was housebroken. Amending tax return turbotax Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. Amending tax return turbotax Progressive deterioration. Amending tax return turbotax    Loss of property due to progressive deterioration is not deductible as a casualty loss. Amending tax return turbotax This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Amending tax return turbotax The following are examples of damage due to progressive deterioration. Amending tax return turbotax The steady weakening of a building due to normal wind and weather conditions. Amending tax return turbotax The deterioration and damage to a water heater that bursts. Amending tax return turbotax However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. Amending tax return turbotax Most losses of property caused by droughts. Amending tax return turbotax To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. Amending tax return turbotax Termite or moth damage. Amending tax return turbotax The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. Amending tax return turbotax However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. Amending tax return turbotax Damage from corrosive drywall. Amending tax return turbotax   Under a special procedure, you may be able to claim a casualty loss deduction for amounts you paid to repair damage to your home and household appliances that resulted from corrosive drywall. Amending tax return turbotax For details, see Publication 547. Amending tax return turbotax Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. Amending tax return turbotax The taking of property must be illegal under the laws of the state where it occurred and it must have been done with criminal intent. Amending tax return turbotax You do not need to show a conviction for theft. Amending tax return turbotax Theft includes the taking of money or property by the following means. Amending tax return turbotax Blackmail. Amending tax return turbotax Burglary. Amending tax return turbotax Embezzlement. Amending tax return turbotax Extortion. Amending tax return turbotax Kidnapping for ransom. Amending tax return turbotax Larceny. Amending tax return turbotax Robbery. Amending tax return turbotax The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Amending tax return turbotax Decline in market value of stock. Amending tax return turbotax   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. Amending tax return turbotax However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. Amending tax return turbotax You report a capital loss on Schedule D (Form 1040). Amending tax return turbotax For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Amending tax return turbotax Mislaid or lost property. Amending tax return turbotax   The simple disappearance of money or property is not a theft. Amending tax return turbotax However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Amending tax return turbotax Sudden, unexpected, and unusual events are defined earlier. Amending tax return turbotax Example. Amending tax return turbotax A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Amending tax return turbotax The diamond falls from the ring and is never found. Amending tax return turbotax The loss of the diamond is a casualty. Amending tax return turbotax Losses from Ponzi-type investment schemes. Amending tax return turbotax   If you had a loss from a Ponzi-type investment scheme, see: Revenue Ruling 2009-9, 2009-14 I. Amending tax return turbotax R. Amending tax return turbotax B. Amending tax return turbotax 735 (available at www. Amending tax return turbotax irs. Amending tax return turbotax gov/irb/2009-14_IRB/ar07. Amending tax return turbotax html). Amending tax return turbotax Revenue Procedure 2009-20, 2009-14 I. Amending tax return turbotax R. Amending tax return turbotax B. Amending tax return turbotax 749 (available at www. Amending tax return turbotax irs. Amending tax return turbotax gov/irb/2009-14_IRB/ar11. Amending tax return turbotax html). Amending tax return turbotax Revenue Procedure 2011-58, 2011-50 I. Amending tax return turbotax R. Amending tax return turbotax B. Amending tax return turbotax 849 (available at www. Amending tax return turbotax irs. Amending tax return turbotax gov/irb/2011-50_IRB/ar11. Amending tax return turbotax html). Amending tax return turbotax If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. Amending tax return turbotax Skip lines 19 to 27. Amending tax return turbotax Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Amending tax return turbotax You do not need to complete Appendix A. Amending tax return turbotax For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. Amending tax return turbotax   If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. Amending tax return turbotax Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Amending tax return turbotax If you incurred this type of loss, you can choose one of the following ways to deduct the loss. Amending tax return turbotax As a casualty loss. Amending tax return turbotax As an ordinary loss. Amending tax return turbotax As a nonbusiness bad debt. Amending tax return turbotax Casualty loss or ordinary loss. Amending tax return turbotax   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. Amending tax return turbotax The choice is generally made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. Amending tax return turbotax If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. Amending tax return turbotax However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. Amending tax return turbotax Once you make this choice, you cannot change it without permission from the Internal Revenue Service. Amending tax return turbotax   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Amending tax return turbotax The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. Amending tax return turbotax Your loss is subject to the 2%-of-adjusted-gross-income limit. Amending tax return turbotax You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. Amending tax return turbotax Nonbusiness bad debt. Amending tax return turbotax   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. Amending tax return turbotax How to report. Amending tax return turbotax   The kind of deduction you choose for your loss on deposits determines how you report your loss. Amending tax return turbotax If you choose: Casualty loss — report it on Form 4684 first and then on Schedule A (Form 1040). Amending tax return turbotax Ordinary loss — report it on Schedule A (Form 1040) as a miscellaneous itemized deduction. Amending tax return turbotax Nonbusiness bad debt — report it on Form 8949 first and then on Schedule D (Form 1040). Amending tax return turbotax More information. Amending tax return turbotax   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684 or Deposit in Insolvent or Bankrupt Financial Institution in Publication 550. Amending tax return turbotax Proof of Loss To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. Amending tax return turbotax You also must be able to support the amount you take as a deduction. Amending tax return turbotax Casualty loss proof. Amending tax return turbotax   For a casualty loss, your records should show all the following. Amending tax return turbotax The type of casualty (car accident, fire, storm, etc. Amending tax return turbotax ) and when it occurred. Amending tax return turbotax That the loss was a direct result of the casualty. Amending tax return turbotax That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage. Amending tax return turbotax Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Amending tax return turbotax Theft loss proof. Amending tax return turbotax   For a theft loss, your records should show all the following. Amending tax return turbotax When you discovered that your property was missing. Amending tax return turbotax That your property was stolen. Amending tax return turbotax That you were the owner of the property. Amending tax return turbotax Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Amending tax return turbotax It is important that you have records that will prove your deduction. Amending tax return turbotax If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. Amending tax return turbotax Figuring a Loss Figure the amount of your loss using the following steps. Amending tax return turbotax Determine your adjusted basis in the property before the casualty or theft. Amending tax return turbotax Determine the decrease in fair market value of the property as a result of the casualty or theft. Amending tax return turbotax From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. Amending tax return turbotax For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. Amending tax return turbotax Gain from reimbursement. Amending tax return turbotax   If your reimbursement is more than your adjusted basis in the property, you have a gain. Amending tax return turbotax This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. Amending tax return turbotax If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. Amending tax return turbotax See Publication 547 for more information on how to treat a gain from a reimbursement for a casualty or theft. Amending tax return turbotax Leased property. Amending tax return turbotax   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. Amending tax return turbotax Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. Amending tax return turbotax The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. Amending tax return turbotax FMV of stolen property. Amending tax return turbotax   The FMV of property immediately after a theft is considered to be zero, since you no longer have the property. Amending tax return turbotax Example. Amending tax return turbotax Several years ago, you purchased silver dollars at face value for $150. Amending tax return turbotax This is your adjusted basis in the property. Amending tax return turbotax Your silver dollars were stolen this year. Amending tax return turbotax The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. Amending tax return turbotax Your theft loss is $150. Amending tax return turbotax Recovered stolen property. Amending tax return turbotax   Recovered stolen property is your property that was stolen and later returned to you. Amending tax return turbotax If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. Amending tax return turbotax Use this amount to refigure your total loss for the year in which the loss was deducted. Amending tax return turbotax   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. Amending tax return turbotax But report the difference only up to the amount of the loss that reduced your tax. Amending tax return turbotax For more information on the amount to report, see Recoveries in chapter 12. Amending tax return turbotax Figuring Decrease in FMV— Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Amending tax return turbotax However, other measures can also be used to establish certain decreases. Amending tax return turbotax Appraisal. Amending tax return turbotax   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. Amending tax return turbotax The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Amending tax return turbotax This information is needed to limit any deduction to the actual loss resulting from damage to the property. Amending tax return turbotax   Several factors are important in evaluating the accuracy of an appraisal, including the following. Amending tax return turbotax The appraiser's familiarity with your property before and after the casualty or theft. Amending tax return turbotax The appraiser's knowledge of sales of comparable property in the area. Amending tax return turbotax The appraiser's knowledge of conditions in the area of the casualty. Amending tax return turbotax The appraiser's method of appraisal. Amending tax return turbotax    You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. Amending tax return turbotax For more information on disasters, see Disaster Area Losses, in Pub. Amending tax return turbotax 547. Amending tax return turbotax Cost of cleaning up or making repairs. Amending tax return turbotax   The cost of repairing damaged property is not part of a casualty loss. Amending tax return turbotax Neither is the cost of cleaning up after a casualty. Amending tax return turbotax But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Amending tax return turbotax The repairs are actually made. Amending tax return turbotax The repairs are necessary to bring the property back to its condition before the casualty. Amending tax return turbotax The amount spent for repairs is not excessive. Amending tax return turbotax The repairs take care of the damage only. Amending tax return turbotax The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Amending tax return turbotax Landscaping. Amending tax return turbotax   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. Amending tax return turbotax You may be able to measure your loss by what you spend on the following. Amending tax return turbotax Removing destroyed or damaged trees and shrubs minus any salvage you receive. Amending tax return turbotax Pruning and other measures taken to preserve damaged trees and shrubs. Amending tax return turbotax Replanting necessary to restore the property to its approximate value before the casualty. Amending tax return turbotax Car value. Amending tax return turbotax    Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. Amending tax return turbotax You can use the book's retail values and modify them by such factors as mileage and the condition of your car to figure its value. Amending tax return turbotax The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. Amending tax return turbotax If your car is not listed in the books, determine its value from other sources. Amending tax return turbotax A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. Amending tax return turbotax Figuring Decrease in FMV— Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. Amending tax return turbotax Cost of protection. Amending tax return turbotax   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. Amending tax return turbotax The amount you spend on insurance or to board up your house against a storm is not part of your loss. Amending tax return turbotax   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. Amending tax return turbotax An example would be the cost of a dike to prevent flooding. Amending tax return turbotax Exception. Amending tax return turbotax   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments. Amending tax return turbotax See Disaster Area Losses in Publication 547. Amending tax return turbotax Incidental expenses. Amending tax return turbotax   Any incidental expenses you have due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. Amending tax return turbotax Replacement cost. Amending tax return turbotax   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. Amending tax return turbotax Sentimental value. Amending tax return turbotax   Do not consider sentimental value when determining your loss. Amending tax return turbotax If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. Amending tax return turbotax Decline in market value of property in or near casualty area. Amending tax return turbotax   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. Amending tax return turbotax You have a loss only for actual casualty damage to your property. Amending tax return turbotax However, if your home is in a federally declared disaster area, see Disaster Area Losses in Publication 547. Amending tax return turbotax Costs of photographs and appraisals. Amending tax return turbotax    Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. Amending tax return turbotax Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. Amending tax return turbotax    Appraisals are used to figure the decrease in FMV because of a casualty or theft. Amending tax return turbotax See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. Amending tax return turbotax   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. Amending tax return turbotax You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). Amending tax return turbotax For information about miscellaneous deductions, see chapter 28. Amending tax return turbotax Adjusted Basis Adjusted basis is your basis in the property (usually cost) increased or decreased by various events, such as improvements and casualty losses. Amending tax return turbotax For more information, see chapter 13. Amending tax return turbotax Insurance and Other Reimbursements If you receive an insurance payment or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Amending tax return turbotax You do not have a casualty or theft loss to the extent you are reimbursed. Amending tax return turbotax If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Amending tax return turbotax You must reduce your loss even if you do not receive payment until a later tax year. Amending tax return turbotax See Reimbursement Received After Deducting Loss , later. Amending tax return turbotax Failure to file a claim for reimbursement. Amending tax return turbotax   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Amending tax return turbotax Otherwise, you cannot deduct this loss as a casualty or theft loss. Amending tax return turbotax However, this rule does not apply to the portion of the loss not covered by insurance (for example, a deductible). Amending tax return turbotax Example. Amending tax return turbotax You have a car insurance policy with a $1,000 deductible. Amending tax return turbotax Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the deduction limits discussed later). Amending tax return turbotax This is true even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. Amending tax return turbotax Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. Amending tax return turbotax Other types of reimbursements are discussed next. Amending tax return turbotax Also see the Instructions for Form 4684. Amending tax return turbotax Employer's emergency disaster fund. Amending tax return turbotax   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. Amending tax return turbotax Take into consideration only the amount you used to replace your destroyed or damaged property. Amending tax return turbotax Example. Amending tax return turbotax Your home was extensively damaged by a tornado. Amending tax return turbotax Your loss after reimbursement from your insurance company was $10,000. Amending tax return turbotax Your employer set up a disaster relief fund for its employees. Amending tax return turbotax Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. Amending tax return turbotax You received $4,000 from the fund and spent the entire amount on repairs to your home. Amending tax return turbotax In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. Amending tax return turbotax Your casualty loss before applying the deduction limits discussed later is $6,000. Amending tax return turbotax Cash gifts. Amending tax return turbotax   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. Amending tax return turbotax This applies even if you use the money to pay for repairs to property damaged in the disaster. Amending tax return turbotax Example. Amending tax return turbotax Your home was damaged by a hurricane. Amending tax return turbotax Relatives and neighbors made cash gifts to you that were excludable from your income. Amending tax return turbotax You used part of the cash gifts to pay for repairs to your home. Amending tax return turbotax There were no limits or restrictions on how you could use the cash gifts. Amending tax return turbotax Because it was an excludable gift, the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. Amending tax return turbotax Insurance payments for living expenses. Amending tax return turbotax   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. Amending tax return turbotax You lose the use of your main home because of a casualty. Amending tax return turbotax Government authorities do not allow you access to your main home because of a casualty or threat of one. Amending tax return turbotax Inclusion in income. Amending tax return turbotax   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Amending tax return turbotax Report this amount on Form 1040, line 21. Amending tax return turbotax However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. Amending tax return turbotax See Qualified disaster relief payments, under Disaster Area Losses in Publication 547. Amending tax return turbotax   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. Amending tax return turbotax Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. Amending tax return turbotax Generally, these expenses include the amounts you pay for the following. Amending tax return turbotax Rent for suitable housing. Amending tax return turbotax Transportation. Amending tax return turbotax Food. Amending tax return turbotax Utilities. Amending tax return turbotax Miscellaneous services. Amending tax return turbotax Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. Amending tax return turbotax Example. Amending tax return turbotax As a result of a fire, you vacated your apartment for a month and moved to a motel. Amending tax return turbotax You normally pay $525 a month for rent. Amending tax return turbotax None was charged for the month the apartment was vacated. Amending tax return turbotax Your motel rent for this month was $1,200. Amending tax return turbotax You normally pay $200 a month for food. Amending tax return turbotax Your food expenses for the month you lived in the motel were $400. Amending tax return turbotax You received $1,100 from your insurance company to cover your living expenses. Amending tax return turbotax You determine the payment you must include in income as follows. Amending tax return turbotax 1) Insurance payment for living expenses $1,100 2) Actual expenses during the month you are unable to use your home because of fire 1,600   3) Normal living expenses 725   4) Temporary increase in living  expenses: Subtract line 3 from line 2 875 5) Amount of payment includible  in income: Subtract line 4  from line 1 $ 225 Tax year of inclusion. Amending tax return turbotax   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. Amending tax return turbotax Example. Amending tax return turbotax Your main home was destroyed by a tornado in August 2011. Amending tax return turbotax You regained use of your home in November 2012. Amending tax return turbotax The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. Amending tax return turbotax You include this amount in income on your 2012 Form 1040. Amending tax return turbotax If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. Amending tax return turbotax Disaster relief. Amending tax return turbotax   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss unless they are replacements for lost or destroyed property. Amending tax return turbotax Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Amending tax return turbotax For more information, see Disaster Area Losses in Publication 547. Amending tax return turbotax Disaster unemployment assistance payments are unemployment benefits that are taxable. Amending tax return turbotax Generally, disaster relief grants and qualified disaster mitigation payments made under the Robert T. Amending tax return turbotax Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not includible in your income. Amending tax return turbotax See Disaster Area Losses in Publication 547. Amending tax return turbotax Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you receive your actual reimbursement. Amending tax return turbotax This section explains the adjustment you may have to make. Amending tax return turbotax Actual reimbursement less than expected. Amending tax return turbotax   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. Amending tax return turbotax Example. Amending tax return turbotax Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2012. Amending tax return turbotax The accident was due to the negligence of the other driver. Amending tax return turbotax At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. Amending tax return turbotax You did not have a deductible loss in 2012. Amending tax return turbotax In January 2013, the court awarded you a judgment of $2,000. Amending tax return turbotax However, in July it became apparent that you will be unable to collect any amount from the other driver. Amending tax return turbotax You can deduct the loss in 2013 subject to the limits discussed later. Amending tax return turbotax Actual reimbursement more than expected. Amending tax return turbotax   If you later receive more reimbursement than you expected after you claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Amending tax return turbotax However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Amending tax return turbotax You do not refigure your tax for the year you claimed the deduction. Amending tax return turbotax For more information, see Recoveries in chapter 12. Amending tax return turbotax If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. Amending tax return turbotax If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. Amending tax return turbotax Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. Amending tax return turbotax See Figuring a Gain in Publication 547 for more information on how to treat a gain from the reimbursement of a casualty or theft. Amending tax return turbotax Actual reimbursement same as expected. Amending tax return turbotax   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. Amending tax return turbotax Example. Amending tax return turbotax In December 2013, you had a collision while driving your personal car. Amending tax return turbotax Repairs to the car cost $950. Amending tax return turbotax You had $100 deductible collision insurance. Amending tax return turbotax Your insurance company agreed to reimburse you for the rest of the damage. Amending tax return turbotax Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. Amending tax return turbotax Due to the $100 rule (discussed later under Deduction Limits ), you cannot deduct the $100 you paid as the deductible. Amending tax return turbotax When you receive the $850 from the insurance company in 2014, do not report it as income. Amending tax return turbotax Single Casualty on Multiple Properties Personal property. Amending tax return turbotax   Personal property is any property that is not real property. Amending tax return turbotax If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. Amending tax return turbotax Then combine these separate losses to figure the total loss from that casualty or theft. Amending tax return turbotax Example. Amending tax return turbotax A fire in your home destroyed an upholstered chair, an oriental rug, and an antique table. Amending tax return turbotax You did not have fire insurance to cover your loss. Amending tax return turbotax (This was the only casualty or theft you had during the year. Amending tax return turbotax ) You paid $750 for the chair and you established that it had an FMV of $500 just before the fire. Amending tax return turbotax The rug cost $3,000 and had an FMV of $2,500 just before the fire. Amending tax return turbotax You bought the table at an auction for $100 before discovering it was an antique. Amending tax return turbotax It had been appraised at $900 before the fire. Amending tax return turbotax You figure your loss on each of these items as follows:     Chair Rug Table 1) Basis (cost) $750 $3,000 $100 2) FMV before fire $500 $2,500 $900 3) FMV after fire –0– –0– –0– 4) Decrease in FMV $500 $2,500 $900 5) Loss (smaller of (1) or  (4)) $500 $2,500 $100           6) Total loss     $3,100 Real property. Amending tax return turbotax   In figuring a casualty loss on personal-use real property, treat the entire property (including any improvements, such as buildings, trees, and shrubs) as one item. Amending tax return turbotax Figure the loss using the smaller of the adjusted basis or the decrease in FMV of the entire property. Amending tax return turbotax Example. Amending tax return turbotax You bought your home a few years ago. Amending tax return turbotax You paid $160,000 ($20,000 for the land and $140,000 for the house). Amending tax return turbotax You also spent $2,000 for landscaping. Amending tax return turbotax This year a fire destroyed your home. Amending tax return turbotax The fire also damaged the shrubbery and trees in your yard. Amending tax return turbotax The fire was your only casualty or theft loss this year. Amending tax return turbotax Competent appraisers valued the property as a whole at $200,000 before the fire, but only $30,000 after the fire. Amending tax return turbotax (The loss to your household furnishings is not shown in this example. Amending tax return turbotax It would be figured separately on each item, as explained earlier under Personal property . Amending tax return turbotax ) Shortly after the fire, the insurance company paid you $155,000 for the loss. Amending tax return turbotax You figure your casualty loss as follows: 1) Adjusted basis of the entire property (land, building, and landscaping) $162,000 2) FMV of entire property before fire $200,000 3) FMV of entire property after fire 30,000 4) Decrease in FMV of entire  property $170,000 5) Loss (smaller of (1) or (4)) $162,000 6) Subtract insurance 155,000 7) Amount of loss after reimbursement $7,000 Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. Amending tax return turbotax If the loss was to property for your personal use or your family's use, there are two limits on the amount you can deduct for your casualty or theft loss. Amending tax return turbotax You must reduce each casualty or theft loss by $100 ($100 rule). Amending tax return turbotax You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule). Amending tax return turbotax You make these reductions on Form 4684. Amending tax return turbotax These rules are explained next and Table 25-1 summarizes how to apply the $100 rule and the 10% rule in various situations. Amending tax return turbotax For more detailed explanations and examples, see Publication 547. Amending tax return turbotax Table 25-1. Amending tax return turbotax How To Apply the Deduction Limits for Personal-Use Property   $100 Rule 10% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. Amending tax return turbotax Apply this rule after you have figured the amount of your loss. Amending tax return turbotax You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Amending tax return turbotax Apply this rule after you reduce each loss by $100 (the $100 rule). Amending tax return turbotax Single Event Apply this rule only once, even if many pieces of property are affected. Amending tax return turbotax Apply this rule only once, even if many pieces of property are affected. Amending tax return turbotax More Than One Event Apply to the loss from each event. Amending tax return turbotax Apply to the total of all your losses from all events. Amending tax return turbotax More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) Apply separately to each person. Amending tax return turbotax Apply separately to each person. Amending tax return turbotax Married Couple—With Loss From the Same Event Filing Jointly Apply as if you were one person. Amending tax return turbotax Apply as if you were one person. Amending tax return turbotax Filing Separately Apply separately to each spouse. Amending tax return turbotax Apply separately to each spouse. Amending tax return turbotax More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. Amending tax return turbotax Apply separately to each owner of jointly owned property. Amending tax return turbotax Property used partly for business and partly for personal purposes. Amending tax return turbotax   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use part and for the business or income-producing part. Amending tax return turbotax You must figure each loss separately because the $100 rule and the 10% rule apply only to the loss on the personal-use part of the property. Amending tax return turbotax $100 Rule After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. Amending tax return turbotax This reduction applies to each total casualty or theft loss. Amending tax return turbotax It does not matter how many pieces of property are involved in an event. Amending tax return turbotax Only a single $100 reduction applies. Amending tax return turbotax Example. Amending tax return turbotax A hailstorm damages your home and your car. Amending tax return turbotax Determine the amount of loss, as discussed earlier, for each of these items. Amending tax return turbotax Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100. Amending tax return turbotax Single event. Amending tax return turbotax   Generally, events closely related in origin cause a single casualty. Amending tax return turbotax It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. Amending tax return turbotax 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Amending tax return turbotax Apply this rule after you reduce each loss by $100. Amending tax return turbotax For more information, see the Form 4684 instructions. Amending tax return turbotax If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. Amending tax return turbotax Example 1. Amending tax return turbotax In June, you discovered that your house had been burglarized. Amending tax return turbotax Your loss after insurance reimbursement was $2,000. Amending tax return turbotax Your adjusted gross income for the year you discovered the theft is $29,500. Amending tax return turbotax You first apply the $100 rule and then the 10% rule. Amending tax return turbotax Figure your theft loss deduction as follows. Amending tax return turbotax 1) Loss after insurance $2,000 2) Subtract $100 100 3) Loss after $100 rule $1,900 4) Subtract 10% × $29,500 AGI 2,950 5) Theft loss deduction –0– You do not have a theft loss deduction because your loss after you apply the $100 rule ($1,900) is less than 10% of your adjusted gross income ($2,950). Amending tax return turbotax Example 2. Amending tax return turbotax In March, you had a car accident that totally destroyed your car. Amending tax return turbotax You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Amending tax return turbotax Your loss on the car was $1,800. Amending tax return turbotax In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. Amending tax return turbotax Your loss on the basement items after reimbursement was $2,100. Amending tax return turbotax Your adjusted gross income for the year that the accident and fire occurred is $25,000. Amending tax return turbotax You figure your casualty loss deduction as follows. Amending tax return turbotax       Base-     Car ment 1) Loss $1,800 $2,100 2) Subtract $100 per incident 100 100 3) Loss after $100 rule $1,700 $2,000 4) Total loss $3,700 5) Subtract 10% × $25,000 AGI 2,500 6) Casualty loss deduction $1,200 Gains and losses. Amending tax return turbotax   If you had both gains and losses from casualties or thefts to personal-use property, you must compare your total gains to your total losses. Amending tax return turbotax Do this after you have reduced each loss by any reimbursements and by $100, but before you have reduced the losses by 10% of your adjusted gross income. Amending tax return turbotax Casualty or theft gains do not include gains you choose to postpone. Amending tax return turbotax See Publication 547 for information on the postponement of gain. Amending tax return turbotax Losses more than gains. Amending tax return turbotax   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. Amending tax return turbotax The rest, if any, is your deductible loss from personal-use property. Amending tax return turbotax Gains more than losses. Amending tax return turbotax   If your recognized gains are more than your losses, subtract your losses from your gains. Amending tax return turbotax The difference is treated as capital gain and must be reported on Schedule D (Form 1040). Amending tax return turbotax The 10% rule does not apply to your gains. Amending tax return turbotax When To Report Gains and Losses Gains. Amending tax return turbotax   If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. Amending tax return turbotax You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone reporting the gain as explained in Publication 547. Amending tax return turbotax If you have a loss, see Table 25-2 . Amending tax return turbotax Table 25-2. Amending tax return turbotax When To Deduct a Loss IF you have a loss. Amending tax return turbotax . Amending tax return turbotax . Amending tax return turbotax THEN deduct it in the year. Amending tax return turbotax . Amending tax return turbotax . Amending tax return turbotax from a casualty, the loss occurred. Amending tax return turbotax in a federally declared disaster area, the disaster occurred or the year immediately before the disaster. Amending tax return turbotax from a theft, the theft was discovered. Amending tax return turbotax on a deposit treated as a:   • casualty or any ordinary loss, a reasonable estimate can be made. Amending tax return turbotax • bad debt, deposits are totally worthless. Amending tax return turbotax Losses. Amending tax return turbotax   Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. Amending tax return turbotax This is true even if you do not repair or replace the damaged property until a later year. Amending tax return turbotax   You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Amending tax return turbotax   If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. Amending tax return turbotax Loss on deposits. Amending tax return turbotax   If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits , earlier. Amending tax return turbotax Disaster Area Loss You generally must deduct a casualty loss in the year it occurred. Amending tax return turbotax However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct the loss on your tax return or amended return for either of the following years. Amending tax return turbotax The year the disaster occurred. Amending tax return turbotax The year immediately preceding the year the disaster occurred. Amending tax return turbotax Gains. Amending tax return turbotax    Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. Amending tax return turbotax For those special rules, see Publication 547. Amending tax return turbotax Postponed tax deadlines. Amending tax return turbotax   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Amending tax return turbotax The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Amending tax return turbotax   If any tax deadline is postponed, the IRS will publicize the postponement in your area by publishing a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Amending tax return turbotax Go to www. Amending tax return turbotax irs. Amending tax return turbotax gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Amending tax return turbotax Who is eligible. Amending tax return turbotax   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Amending tax return turbotax Any individual whose main home is located in a covered disaster area (defined next). Amending tax return turbotax Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Amending tax return turbotax Any individual who is a relief worker affiliated with a recognized government or philanthropic organization who is assisting in a covered disaster area. Amending tax return turbotax Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Amending tax return turbotax The main home or principal place of business does not have to be located in the covered disaster area. Amending tax return turbotax Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Amending tax return turbotax The spouse on a joint return with a taxpayer who is eligible for postponements. Amending tax return turbotax Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area. Amending tax return turbotax Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Amending tax return turbotax Any other person determined by the IRS to be affected by a federally declared disaster. Amending tax return turbotax Covered disaster area. Amending tax return turbotax   This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. Amending tax return turbotax Abatement of interest and penalties. Amending tax return turbotax   The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. Amending tax return turbotax More information. Amending tax return turbotax   For more information, see Disaster Area Losses in Publication 547. Amending tax return turbotax How To Report Gains and Losses Use Form 4684 to report a gain or a deductible loss from a casualty or theft. Amending tax return turbotax If you have more than one casualty or theft, use a separate Form 4684 to determine your gain or loss for each event. Amending tax return turbotax Combine the gains and losses on one Form 4684. Amending tax return turbotax Follow the form instructions as to which lines to fill out. Amending tax return turbotax In addition, you must use the appropriate schedule to report a gain or loss. Amending tax return turbotax The schedule you use depends on whether you have a gain or loss. Amending tax return turbotax If you have a: Report it on: Gain Schedule D (Form 1040) Loss Schedule A (Form 1040) Adjustments to basis. Amending tax return turbotax   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive, and by any deductible loss. Amending tax return turbotax Amounts you spend to restore your property after a casualty increase your adjusted basis. Amending tax return turbotax See Adjusted Basis in chapter 13 for more information. Amending tax return turbotax Net operating loss (NOL). Amending tax return turbotax    If your casualty or theft loss deduction causes your deductions for the year to be more than your income for the year, you may have an NOL. Amending tax return turbotax You can use an NOL to lower your tax in an earlier year, allowing you to get a refund for tax you have already paid. Amending tax return turbotax Or, you can use it to lower your tax in a later year. Amending tax return turbotax You do not have to be in business to have an NOL from a casualty or theft loss. Amending tax return turbotax For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Amending tax return turbotax Prev  Up  Next   Home   More Online Publications