Yes, you can take the loss, and yes, the amount will lower your basis.
Your original basis in property is adjusted (increased or decreased) by certain events. If you make improvements to the property, increase your basis. If you take deductions for depreciation or casualty losses, reduce your basis.
To enter this in TurboTax:
- Got to the "Federal Taxes" tab
- Click on "Deductions & Credit"
- Scroll down to "Other Deductions and Credits" and click on "show more" to the right of it
- Click "Start" next to "Casualties and Thefts" continue to follow the onscreen guide.
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