Introduction

This workbook is designed to help you figure your loss on personal-use property in the event of a disaster, casualty, or theft. It contains schedules to help you figure the loss to your main home, its contents, and your motor vehicles. However, these schedules are for your information only. You must complete Form 4684 to report your loss.

To help you figure your loss, the following schedules are included in this workbook.

• Schedules 1 - 18, for listing the contents of your home
• Schedule 19, Summary of Contents of Home
• Schedule 20, Loss on Personal-Use Real Property
• Schedule 21, Loss on Cars, Vans, Trucks, and Motorcycles
• Schedule 22, Casualty or Theft Loss Deduction

To use this workbook, you will need the following items.

Publication 547.   Publication 547, Casualties, Disasters, and Thefts (Business and Nonbusiness), explains the comprehensive rules for figuring a loss.

Form 4684 and instructions.   Form 4684, Casualties and Thefts, is used to report your casualty, disaster, or theft. You must attach it to your tax return (Form 1040).

See How To Get More Information, later, if you need to get this publication or form.

Losses

Generally, you may deduct losses to your home, household goods, and motor vehicles on your federal income tax return. However, you may not deduct a casualty or theft loss that is covered by insurance unless you filed a timely insurance claim for reimbursement. Any reimbursement you receive will reduce the loss. If you did not file an insurance claim, you may deduct only the part of the loss not covered by insurance.

Amount of loss.   To determine the amount of your loss, you must know the adjusted basis of the property, and its fair market value (FMV) immediately before and immediately after the disaster or casualty. If you bought the property, your basis is usually its cost. If you acquired it in any other way, your basis is determined as discussed in Publication 551, Basis of Assets.

FMV is the price for which you could sell your property to a willing buyer, when neither of you has to sell or buy and both of you know all the relevant facts.

You figure the amount of your loss using the following steps.

1. Determine your adjusted basis in the property before the casualty or theft.
2. Determine the decrease in fair market value of the property as a result of the casualty or theft. (The decrease in FMV is the difference between the property's value immediately before and immediately after the casualty or theft.)
3. From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive.

Apply the deduction limits, discussed later, to determine the amount of your deductible loss.

Separate computations.    Generally, if a single casualty or theft involves more than one item of property, you must figure the loss on each item separately. Then combine the losses to determine the total loss from that casualty or theft.

Exception for personal-use real property.   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. Figure the loss using the smaller of the following.

• The decrease in FMV of the entire property.
• The adjusted basis of the entire property.

Deduction limits.   After you have figured the amount of your loss, as discussed earlier, you must figure how much of the loss you can deduct. If the loss was to property for your personal use or your family's, there are two limits on the amount you can deduct for your casualty or theft loss.

1. You must reduce each casualty or theft loss by $100 ($100 rule).
2. You must further reduce the total of all your losses by 10% of your adjusted gross income (10% rule).

For more information about the deduction limits, see Publication 547.

When your loss is deductible.   You can generally deduct a casualty or disaster area loss only in the tax year in which the casualty or disaster occurred. You can generally deduct a theft loss only in the year you discovered your property was stolen. However, you can choose to deduct disaster area losses on your return for the year immediately before the year of the disaster if the President has declared your area a federal disaster area. For details, see Disaster Area Losses in Publication 547.

How To Get More Information

You can order free publications and forms, ask tax questions, and get more information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

Free tax services.   To find out what services are available, see Publication 910, Guide to Free Tax Services. It contains a list of free tax publications and an index of tax topics. It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics.

Personal computer. With your personal computer and modem, you can access the IRS on the Internet at www.irs.ustreas.gov. While visiting our Web Site, you can select:

• Frequently Asked Tax Questions to find answers to questions you may have.
• Fill-in Forms to complete tax forms on-line.
• Forms and Publications to download forms and publications or search publications by topic or keyword.
• Comments & Help to e-mail us with comments about the site or with tax questions.
• Digital Dispatch and IRS Local News Net to receive our electronic newsletters on hot tax issues and news.

You can also reach us with your computer using any of the following.

• Telnet at iris.irs.ustreas.gov
• File Transfer Protocol at ftp.irs.ustreas.gov
• Direct dial (by modem) 703-321-8020