When you go through a loss of property, whether through theft or natural disaster, the first thing you think of may not be the ability to use the lost property as a tax credit. Fortunately, it is possible to use property that has been lost as a tax write off.
An unexpected loss of your property can be used as a deduction on your taxes for the year as long as you meet certain criteria. The property that you write off cannot have been covered by an insurance claim. If insurance has paid the monetary value for your property or replaced the lost items, then these cannot be used on your taxes. Items that have not yet been covered can be claimed and must be claimed at their depreciated value. The fair market value is used in the assessment of property-related claims.
Any property related damages that you are eligible to claim must have happened in the tax year that you are placing the claim. Prior damaged is not typically eligible for deduction though later damages. In some instances, if damage relief is being relied upon and does not happen, then the damage may be claimed. Property that is stolen may be claimed in the tax year it is discovered.
Property loss or damage tax claims require the use of itemized deductions. If you are used to using the standard the deductions, this system will be a bit different. To itemize, you must use the 1040A IRS form to file taxes for the year. A 1040A form will allow you to place any deductions, including property damage and others, to subtract from your overall owed federal tax amount.