Hello, my name is Jerome Silas. Welcome to my website about creating and following a healthy household budget. When I was in college, I tried to create a smart budget to save all the pennies I could after paying my bills. Unfortunately, I jumped in too fast and created a budget that was impossible to follow for the long term. Through the years, I have learned all about the methods that work best while creating and following a budget. I would like to share those methods with you all to help everyone create a healthy household budget. Thanks for your time.
Despite their best intentions, some individuals are sidetracked each year by some type of unfortunate life event. A severe weather storm is capable of leaving a trail of haphazard destruction to homes. News reports sometimes highlight the plight of victims of theft. Although a tax deduction cannot replace a specific lost asset, a deduction can partially offset the financial loss.
For a casualty loss or theft to be tax-deductible, the event must be of a sudden and unexpected nature. For individuals, a deductible casualty loss or theft must be claimed as an itemized deduction. A substantial loss, however, may be the deciding factor that increases your total itemized deductions above your standard deduction amount.
Form 4684
IRS Form 4684 is used to calculate the deductible portion of a casualty loss or theft. The form is designed to measure the change in the affected asset's value to you as a result of the damaging event. The loss from a casualty or theft cannot be greater than the original cost basis. The amount of the loss in value is then reduced by any insurance reimbursement received. However, the loss is not the amount actually deductible.
The loss after any insurance reimbursement must be further reduced to calculate the amount that is deductible. The loss is first reduced by $100. That net result is then compared with a specific line entry on your income tax return referred to as adjusted gross income. After the $100 reduction, the loss is deductible to the extent that it exceeds 10 percent of your adjusted gross income.
Casualty losses
Unexpected events that can lead to casualty losses include events such as tornadoes, floods, and residential house fires. If you are in area designated as a federal disaster area, the deductible loss can be claimed quickly by amending your tax return from last year. The option to place the deduction on last year's return allows affected residents in disaster areas to potentially receive funds within a short time frame.
Theft losses
Some types of theft are not likely to be covered by insurance, resulting in an outright financial loss. In addition to burglary and robbery, deductible types of theft include other acts such as embezzlement and extortion. The taking of assets through misrepresentation is considered theft if the act is illegal, so losses due to internet and telephone schemes are deductible in most instances.
Form 4684 is a supporting form for IRS Schedule A, which is the form used to enter itemized deductions. Contact a tax service like Balkcom Pearsall & Parrish CPA's PA for more information on your available tax deductions.
Share15 June 2017
