Uninsured loss could be a tax deduction

Tragedy strikes; flood, tornado, fire, theft, vandalism or natural disasters hit your home or business, and you find your personal property is either uninsured or underinsured. Devastating though it may be, did you know that you may be able to claim tax deductions for at least some of your loss?

Improving the ability to support the deduction usually requires a professional valuation of your property before and after the loss or damage. Having detailed records and an inventory of your property and possessions helps to strengthen your claim for a loss. You will calculate your "adjusted basis" on the property - this is your original cost and additional capital improvements for which you have paid during your ownership, less depreciation deductions and any previous casualty write-offs that you have claimed.

If you have insurance coverage, subtract anything you have received or expect to receive from your insurance company. Also subtract $100 from each theft or casualty loss, as the IRS disallows write-offs for the first $100. Lastly, subtract 10% of your AGI (adjusted gross income) for the same year as your loss to reach your final tax deduction.

The process is tricky, but it is good to know that you may not be incurring a total loss. However, many exceptions and complications may apply, and good record keeping will benefit the claimants, as the United States Tax Court emphasizes that it will "bear heavily" against taxpayers basing their loss estimates on personal recollection.

For more information on the tax deductibility of uninsured personal property, please contact me or visit www.irs.gov and download publications 527 and 2194.

This information was provided by Susie Keaton. She graduated cum laude from Ball State University with a Bachelors of Science in Accounting and is Certified as a Public Accountant in the State of Indiana. With over 16 years of experience as a CPA, Susie recently established Keaton CPA Group; her practice focuses on serving small and medium-sized business clients in the manufacturing and professional services area with their tax and accounting needs.