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Turbotax For Military Members

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Turbotax For Military Members

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The Turbotax For Military Members

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