This is a scenario that some in the areas affected by Hurricane Katrina are facing and it’s ugly. If your home is destroyed or damaged in some sort of accident or act of nature/God and your homeowners insurance doesn’t completely reimburse you, you might be able to claim it as a casualty loss deduction on your federal income tax return. In the event something was stolen and you are not reimbursed, you can claim a theft loss tax deduction. Another requirement is that the amount of loss exceeds 10% of your adjusted gross income (AGI) and the first $100 of loss isn’t covered. Another sticking point is that its something you will need to claim on a Schedule A, which means you’ll have to itemize. If the standard deduction is a better choice for you than itemizing your deductions, you’ll again lose out unfortunately.
One silver lining to this cloud is that your deductible counts. In other words, let’s say you have a $1000 deductible and your house suffers $2000 in damage. You can claim $900 ($1000 not covered by insurance less the $100) if your AGI is less than $9000 (10% rule).
If you meet those requirements and it makes monetary sense for you to itemize, you simply enter in the amount not covered by your insurance company on Schedule A according to the calculations from Form 4684: Casualties and Thefts.
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