Casualty and Theft Tax Deductions

by Kevi Cooper
(Las Vegas, NV)

Do you know that casualty and theft losses can be considered as rental property tax deductions as well? Read on to learn if you can turn your unexpected losses into tax cutting deductions.

A casualty is defined by IRS as damage to your rental property by an event that is identifiable, sudden and unexpected. Such events may include fires, earthquakes, floods, hurricanes, vandalism and 3rd party accidents. Burglary and robbery are classified as theft losses.

Calculating your casualty losses is a bit tricky but highly doable:

Adjusted Loss = Total Loss - (100 x No. of Casualty Events)

Deductible Loss = Adjusted Loss - (10% of Adjusted Gross Income)

For example an earthquake hit your rental property, causing $4,000 in damages. In the same year a $1,200 television was stolen from the property as well. Your adjusted gross income is $35,000 per year. How much are your deductions for casualty and theft loss?

Adjusted Loss = (4,000 + 1,200) - (2 x 100) = $5,000

Deductible Loss = 5,000 - (10% x 35,000) = $1,500

In this case you can write off a total of $1,500 as rental property tax deductions. Help that my explanation helps.

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Reply: Paula NEW
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Correct treatment? NEW
by: Glenn Uhlig, CPA

In your example, I believe you are handling this as a personal loss. Since this is a rental, I believe it should be handled as a business loss which has a different treatment

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