Home Insurance Guide

Unfortunately, sometimes an event will occur that your homeowner’s or renter’s insurance won’t cover (say flood damage if you don’t have separate flood insurance or a jewelry theft without the necessary jewelry riders) and in those cases there may be a way for you to recover part of the financial impact. If there was a “sudden, unexpected, or unusual” casualty or theft loss where you weren’t compensated, you might qualify for what’s known as a casualty loss tax deduction.

The casualty loss tax deduction’s rules are that the personal loss must exceed $100 and be over 10% of your 2006 adjusted gross income (AGI). If the loss was under $100 plus 10% of your AGI, the loss does not qualify. What actually happens is that the loss is adjusted down by $100 plus 10% of your AGI and that value is tax deductible.

Let’s use an example to illustrate this scenario. John’s AGI is $30,000 for 2006 and he recently suffered an uninsured loss of $5,000. 10% of his AGI is $3,000, plus $100, means that $3,100 of his loss is not tax deductible. So, the maximum deduction John can claim on his 2006 tax return is $1,900.