Can You Deduct Stolen Property on Your Income Taxes?

The FBI reports more than $13.3 billion of property is stolen each year.

The FBI reports more than $13.3 billion of property is stolen each year.

If you have property stolen, you have approximately a one-in-four chance of getting it back, according to the Federal Bureau of Investigation. In the more likely event that your property is never recovered, you might at least be able to claim a tax deduction for the loss.

Stolen Property

You can deduct theft losses of property involving your home, household items or vehicles when you file your federal income tax return. To qualify as a theft, the property must have been intentionally and illegally taken with criminal intent. If the bank repossessed your car for non-payment of your car loan, you can't claim the loss on your taxes. The bank may have intentionally taken your car, but it did not do so illegally. If your neighbor borrowed your lawnmower and never returned it, you can't claim the loss as a theft, because the borrowing was not done with criminal intent.

Insurance

You can't claim a theft loss on your federal income tax return that was reimbursed by insurance. You can claim any portion of the loss that was not reimbursed by your insurance policy, provided you filed your claim in a timely manner. You must adjust the cost of the stolen item to reflect its current market value, because the IRS will only allow you to deduct the depreciated value of used items, not the the cost to replace them new.

Itemized Deductions

You must itemize your deductions if you wish to claim a theft loss on your federal income tax return. You can include your theft loss with your other itemized deductions, including your mortgage interest, deductible taxes, medical expenses and employee business expenses. The IRS recommends figuring your tax return using both the itemized deduction and standard deduction methods, then filing your tax return using the method that provides the lowest tax obligation.

Form 4684

You can only deduct the amount of your unreimbursed theft and casualty losses that exceed 10 percent of your adjusted gross income. Figure your unreimbursed theft loss on IRS Form 4684. If your results are greater than 10 percent of your AGI, you can add the difference to your itemized deductions. If your unreimbursed theft loss is less than 10 percent of your AGI you cannot take a deduction for the loss.

About the Author

Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.

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