In June you had a car accident and your car was totaled. You did not carry collision coverage on your car. You paid $18,500 for the car. At the time of the accident the car was worth $17,000. The salvage value of the car after the accident was $200. Your adjusted gross income for the year the casualty occurred is $70,000. You figure your casualty loss deduction as follows:

1. Adjusted basis of car (cost in this example) $18,500
2. Value of car at time of accident $17,000
3. Value of car after the accident $200
4. Decrease in value (line 2 minus line 3) $16,800
5. Loss (smaller of line 1 or 4) $16,800
6. Subtract insurance $0
7. Loss after reimbursement $16,800
8. Subtract $100 $16,700
9. Subtract 10% of $70,000 AGI $7,000

10. TOTAL CASUALTY LOSS DEDUCTION $9,700

Although a $9,700 tax deduction may not be as desirable as a $17,000 check from your insurance company, in this case, it's better than nothing. So the next time you suffer a property loss that's not fully covered by insurance, you may still be elgible for some financial relief. And that could cause you to say something you've never said before "Thank you IRS!"

Page 2 of 2 :: First | Last :: Prev | 1 2 | Next