Deduction Limits hôtels LeuvenAfter you have figured your casualty or theft loss, you must figurehow much of the loss you can deduct. The deduction for casualty and theft losses of employee propertyand personal-use property is limited. A loss on employee property issubject to the 2% rule, discussed next. A loss on property you own foryour personal use is subject to the $100 and 10% rules discussedlater. The $100 and 10% rules are also summarized in Table 2. Table 2. Deduction Limit Rules for Personal-Use Property Losses on business property (other than employee property) andincome-producing property are not subject to these rules. 2% Rule The casualty and theft loss deduction for employee property, whenadded to your job expenses and most other miscellaneous itemizeddeductions on Schedule A (Form 1040), must be reduced by 2% of youradjusted gross income. Employee property is property used inperforming services as an employee. $100 Rule After you have figured your casualty or theft loss on personal-useproperty, as discussed earlier, you must reduce that loss by $100.This reduction applies to each total casualty or theft loss. It doesnot matter how many pieces of property are involved in an event. Onlya single $100 reduction applies. Example.You have $250 deductible collision insurance on your car. The caris damaged in a collision. The insurance company pays you for thedamage minus the $250 deductible. Your casualty loss for the collisionis $150 ($250 - $100) because the first $100 of a casualty losson personal-use property is not deductible. Single event.Generally, events closely related in origin cause a singlecasualty. It is a single casualty when the damage is from two or moreclosely related causes, such as wind and flood damage caused by thesame storm. A single casualty may also damage two or more pieces ofproperty, such as a hailstorm that damages both your home and your carparked in your driveway. Example 1.A thunderstorm destroyed your pleasure boat. You also lost someboating equipment in the storm. Your loss was $5,000 on the boat and$1,200 on the equipment. Your insurance company reimbursed you $4,500for the damage to your boat. You had no insurance coverage on theequipment. Your casualty loss is from a single event and the $100 ruleapplies once. Figure your loss before applying the 10% rule (discussedlater) as follows. Boat Equipment 1. Loss $5,000 $1,200 2. Subtract insurance      4,500        -0- 3. Loss after reimbursement       $500     $1,200 4. Total loss $1,700 5. Subtract $100        100 6. Loss before 10% rule $1,600 Example 2.Thieves broke into your home in January and stole a ring and a furcoat. You had a loss of $200 on the ring and $700 on the coat. This isa single theft. The $100 rule applies to the total $900 loss. Example 3.In September, hurricane winds blew the roof from your home. Floodwaters caused by the hurricane further damaged your home and destroyedyour furniture and personal car. This is considered a single casualty.The $100 rule is applied to your total loss from the flood waters andthe wind. More than one loss.If you have more than one casualty or theft loss during your taxyear, you must reduce each loss by $100. Example.Your family car was damaged in an accident in January. Your lossafter the insurance reimbursement was $75. In February, your car wasdamaged in another accident. This time your loss after the insurancereimbursement was $90. Apply the $100 rule to each separate casualtyloss. Since neither accident resulted in a loss of over $100, you arenot entitled to any deduction for these accidents. Bojnice hotel offersMore than one person.If two or more individuals (other than a husband and wife filing ajoint return) have losses from the same casualty or theft, the $100rule applies separately to each individual. Example.A fire damaged your house and also damaged the personal property ofyour house guest. You must reduce your loss by $100. Your house guestmust reduce his or her loss by $100. Married taxpayers.If you and your spouse file a joint return, you are treated as oneindividual in applying the $100 rule. It does not matter whether youown the property jointly or separately. If you and your spouse have a casualty or theft loss and you fileseparate returns, each of you must reduce your loss by $100. This istrue even if you own the property jointly. If one spouse owns theproperty, only that spouse can figure a loss deduction on a separatereturn. If the casualty or theft loss is on property you own as tenants bythe entirety, each of you can figure your deduction on only one-halfof the loss on separate returns. Neither of you can figure yourdeduction on the entire loss on a separate return. Each of you mustreduce the loss by $100. jugar baccara en lineaMore than one owner.If two or more individuals (other than a husband and wife filing ajoint return) have a loss on property jointly owned, the $100 ruleapplies separately to each. For example, if two sisters live togetherin a home they own jointly and they have a casualty loss on the home,the $100 rule applies separately to each sister. 10% Rule You must reduce the total of all your casualty or theft losses onpersonal-use property by 10% of your adjusted gross income. Apply thisrule after you reduce each loss by $100. If you have both gains andlosses from casualties or thefts, see Gains and losses,later in this discussion. Example.In June, you discovered that your house had been burglarized. Yourloss after insurance reimbursement was $2,000. Your adjusted grossincome is $29,500. Figure your theft loss as follows. 1. Loss after insurance $2,000 2. Subtract $100        100 3. Loss after $100 rule $1,900 4. Subtract 10% of $29,500 AGI     $2,950 5. Theft loss deduction -0- You do not have a theft loss deduction because your loss ($1,900)is less than 10% of your adjusted gross income ($2,950). More than one loss.If you have more than one casualty or theft loss during your taxyear, reduce each loss by any reimbursement and by $100. Then you mustreduce the total of all your losses by 10% of your adjusted grossincome. Example.In March, you had a car accident that totally destroyed your car.You did not have collision insurance on your car, so you did notreceive any insurance reimbursement. Your loss on the car was $1,200.In November, a fire damaged your basement and totally destroyed thefurniture, washer, dryer, and other items you had stored there. Yourloss on the basement items after reimbursement was $1,700. Youradjusted gross income is $25,000. You figure your casualty lossdeduction as follows. Car Basement 1. Loss $1,200 $1,700 2. hotel rooms TorquaySubtract $100 per incident        100        100 3. Loss after $100 rule     $1,100     $1,600 4. Total loss $2,700 5. Subtract 10% of $25,000 AGI      2,500 6. Casualty loss deduction $200 Married taxpayers.If you and your spouse file a joint return, you are treated as oneindividual in applying the 10% rule. It does not matter if you own theproperty jointly or separately. If you file separate returns, the 10% rule applies to each returnon which a loss is claimed. More than one owner.If two or more individuals (other than husband and wife filing ajoint return) have a loss on property that is owned jointly, the 10%rule applies separately to each. Gains and losses.If you have casualty or theft gains as well as losses topersonal-use property, you must compare your total gains to your totallosses. Do this after you have reduced each loss by any reimbursementsand by $100 but before you have reduced the losses by 10% of youradjusted gross income. Losses more than gains.If your losses are more than your recognized gains, subtract yourgains from your losses and reduce the result by 10% of your adjustedgross income. The rest, if any, is your deductible loss frompersonal-use property. Example.Your theft loss after reducing it by reimbursements and by $100 is$2,700. Your casualty gain is $700. Because your loss is more thanyour gain, you must reduce your $2,000 net loss ($2,700 - $700)by 10% of your adjusted gross income. Gains more than losses.If your recognized gains are more than your losses, subtract yourlosses from your gains. The difference is treated as a capital gainand must be reported on Schedule D (Form 1040). The 10% rule does notapply to your losses. Example.Your theft loss after reducing it by reimbursements and by $100 is$600. Your casualty gain is $1,600. Because your gain is more thanyour loss, you must report the $1,000 net gain ($1,600 - $600)on Schedule D. More information.For information on how to figure recognized gains, seeFiguring a Gain, later. Recognized gains do not includegains you choose to postpone. See Postponement of Gain,later. Figuring the Deduction Generally, you must figure your loss separately for each itemstolen, damaged, or destroyed. However, a special rule applies to realproperty you own for personal use. Real property.In figuring a loss to real estate you own for personal use, allimprovements, such as buildings and ornamental trees, are consideredtogether. Example 1.In June, a fire destroyed your lakeside cottage, which cost $44,800(including $4,500 for the land) several years ago. (Your land was notdamaged.) This was your only casualty or theft loss for the year. TheFMV of the property immediately before the fire was $80,000 ($45,000for the cottage and $35,000 for the land). The FMV immediately afterthe fire was $35,000 (value of the land). You collected $30,000 fromthe insurance company. Your adjusted gross income is $40,000. Yourdeduction for the casualty loss is $10,700, figured in the followingmanner. 1. Adjusted basis of the entire property (cost inthis example)    $44,800 2. FMV of entire property before fire $80,000 3. FMV of entire property after fire     35,000 4. Decrease in FMV of entire property (line 2- line 3)    $45,000 5. Amount of loss (smaller of line 1 or line 4) $44,800 6. Subtract insurance     30,000 7. Loss after reimbursement $14,800 8. Subtract $100        100 9. Loss after $100 rule $14,700 10. Subtract 10% of $40,000 AGI      4,000 11. Casualty loss deduction $10,700 Example 2.You bought your home a few years ago. You paid $50,000 ($10,000 forthe land and $40,000 for the house). You also spent an additional$2,000 for landscaping. This year a fire destroyed your home. The firealso damaged the shrubbery and trees in your yard. The fire was youronly casualty or theft loss this year. Competent appraisers valued theproperty as a whole at $75,000 before the fire, but only $15,000 afterthe fire. Shortly after the fire, the insurance company paid you$45,000 for the loss. Your adjusted gross income is $48,000. Youfigure your casualty loss deduction as follows. 1. Adjusted basis of the entire property (cost ofland, building, and landscaping)    $52,000 2. FMV of entire property before fire $75,000 3. FMV of entire property after fire     15,000 4. Decrease in FMV of entire property (line 2 - line3)    $60,000 5. Amount of loss (smaller of line 1 or line 4) $52,000 6. Subtract insurance     45,000 7. Loss after reimbursement $7,000 8. Subtract $100        100 9. Loss after $100 rule $6,900 10. Subtract 10% of $48,000 AGI      4,800 11. Casualty loss deduction $2,100 Personal property.Personal property is generally any property that is not realproperty. If your personal property is stolen or is damaged ordestroyed by a casualty, you must figure your loss separately for eachitem of property. Then combine these separate losses to figure thecasualty loss deduction. Example 1.In August, a storm destroyed your pleasure boat, which cost you$8,500. This was your only casualty or theft loss for the year. ItsFMV immediately before the storm was $7,000. You had no insurance, butwere able to salvage the motor of the boat and sell it for $200. Youradjusted gross income is $52,000. Although the motor was sold separately, it is part of the boat andnot a separate item of property. You figure your casualty lossdeduction as follows. 1. Adjusted basis (cost in this example)     $8,500 2. FMV before storm $7,000 3. FMV after storm        200 4. Decrease in FMV (line 2 - line 3)     $6,800 5. Amount of loss (smaller of line 1 or line 4) $6,800 6. Subtract insurance        -0- 7. Loss after reimbursement $6,800 8. Subtract $100        100 9. Loss after $100 rule $6,700 10. Subtract 10% of $52,000 AGI      5,200 11. Casualty loss deduction $1,500 Example 2.In June, you were involved in an auto accident that totallydestroyed your personal car and your antique pocket watch. You hadbought the car for $10,000. The FMV of the car just before theaccident was $7,500. Its FMV just after the accident was $80 (scrapvalue). Your insurance company reimbursed you $6,000. Your watch was not insured. You had purchased it for $250. Its FMVjust before the accident was $500. Your adjusted gross income is$31,000. Your casualty loss deduction is zero, figured as follows. Car Watch 1. Adjusted basis (cost)    $10,000       $250 2. FMV before accident $7,500 $500 3. FMV after accident         80        -0- 4. Decrease in FMV (line 2 - line 3)     $7,420       $500 5. Loss (smaller of line 1 or line 4) $7,420 $250 6. Subtract insurance      6,000        -0- 7. Loss after reimbursement     $1,420       $250 8. Total loss $1,670 9. Subtract $100        100 10. Loss after $100 rule $1,570 11. Subtract 10% of $31,000 AGI      3,100 12. Casualty loss deduction -0- Both real and personal properties.When a casualty involves both real and personal properties, youmust figure the loss separately for each type of property. But youapply a single $100 reduction to the total loss. Then you apply the10% rule. Example.In July, a hurricane damaged your home, which cost you $64,000including land. The FMV of the property (both building and land)immediately before the storm was $70,000 and its FMV immediately afterthe storm was $60,000. Your household furnishings were also damaged.You separately figured the loss on each damaged household item andarrived at a total loss of $600. You collected $5,000 from the insurance company for the damage toyour home, but your household furnishings were not insured. Youradjusted gross income is $44,000. You figure your casualty lossdeduction from the hurricane in the following manner. 1. Adjusted basis of real property (cost in thisexample)    $64,000 2. FMV of real property beforehurricane $70,000 3. FMV of real property after hurricane     60,000 4. Decrease in FMV of real property (line 2- line 3)    $10,000 5. Loss on real property (smaller of line 1 orline 4) $10,000 6. Subtract insurance      5,000 7. Loss on real property after reimbursement     $5,000 8. Loss on furnishings $600 9. Subtract insurance        -0- 10. Loss on furnishings after reimbursement       $600 11. Total loss (line 7 plus line 10) $5,600 12. Subtract $100        100 13. ERROR MSGLoss after $100 rule $5,500 14. Subtract 10% of $44,000 AGI      4,400 15. Casualty loss deduction $1,100 Property used partly for business and partly for personalpurposes.When property is used partly for personal purposes and partly forbusiness or income-producing purposes, the casualty or theft lossdeduction must be figured separately for the personal-use portion andfor the business or income-producing portion. You must figure eachloss separately because the losses attributed to these two uses arefigured in two different ways. The $100 rule and the 10% rule applyonly to the casualty or theft loss on the personal-use portion of theproperty. Example.You own a building that you constructed on leased land. You usehalf of the building for your business and you live in the other half.The cost of the building was $40,000. You made no further improvementsor additions to it. A flood in March damaged the entire building. The FMV of thebuilding was $38,000 immediately before the flood and $32,000afterwards. Your insurance company reimbursed you $4,000 for the flooddamage. Depreciation on the business part of the building before theflood totaled $2,400. Your adjusted gross income is $25,000. You have a deductible business casualty loss of $1,000. You do nothave a deductible personal casualty loss because of the 10% rule. Youfigure your loss as follows. Business Part Personal Part 1. Cost (total $40,000) $20,000 $20,000 2. Subtract depreciation      2,400        -0- 3. Adjusted basis    $17,600    $20,000 4. FMV before flood (total $38,000) $19,000 $19,000 5. FMV after flood (total $32,000)     16,000     16,000 6. Decrease in FMV(line 4 - line 5)     $3,000     $3,000 7. Amount of loss (smaller of line 3 or line 6) $3,000 $3,000 8. Subtract insurance      2,000      2,000 9. Loss after reimbursement $1,000 $1,000 10. Subtract $100 on personal-use property        -0-        100 11. Loss after $100 rule $1,000 $900 12. Subtract 10% of $25,000 AGI on personal-useproperty        -0-      2,500 13. Deductible business loss $1,000 14. Deductible personal loss -0-