I was defrauded of $88,000 by a contractor in 2017. I think this can be deducted from my 2017 IRA withdrawal of $215,000 (age 67) to cut taxes. Correct?

[t9v4p3l2]

This would be a theft/casualty itemized deduction.  I have good documentation, legal help, and know this a grey area for audit.

[SweetieJean]

Was this for a personal property, or a rental one?

[t9v4p3l2]

My primary residence, personal not rental

[SweetieJean]

I hope you filed a police report.

[macuser_22]

And you must have either sued the contractor or be able to prove (to the IRS) that even if you did sue that the judgement would not be recoverable such as the contractor filed for bankruptcy, is insolvent or other reason that it would be uncollectable.

[SweetieJean · Accepted solution]

See IRS Tax Topic Number: 515 - Casualty, Disaster, and Theft Losses -  https://www.irs.gov/taxtopics/tc500/tc515

Individuals are required to claim their casualty and theft losses as an itemized deduction on  Form 1040, Schedule A (PDF) , Itemized Deductions .  For property held by you for personal use, you must subtract $100 from each casualty or theft event that occurred during the year after you've subtracted any salvage value and any insurance or other reimbursement. Then add up all those amounts and subtract 10% of your adjusted gross income from that total to calculate your allowable casualty and theft losses for the year. 

For example - If you had a loss due to the flood of $88,000 and your Adjusted Gross Income was $250,000 then your deductible loss reported on Schedule A would be $250,000 -88,000 8,000 - $5,000 - $100 = $2,900.  Then your Total itemized deductions reported on Schedule A must be greater than the standard deduction for your filing status to have any tax benefit.

See IRS Tax Topic Number: 515 - Casualty, Disaster, and Theft Losses -  https://www.irs.gov/taxtopics/tc500/tc515

Individuals are required to claim their casualty and theft losses as an itemized deduction on  Form 1040, Schedule A (PDF) , Itemized Deductions .  For property held by you for personal use, you must subtract $100 from each casualty or theft event that occurred during the year after you've subtracted any salvage value and any insurance or other reimbursement. Then add up all those amounts and subtract 10% of your adjusted gross income from that total to calculate your allowable casualty and theft losses for the year. 

For example - If you had a loss due to the flood of $88,000 and your Adjusted Gross Income was $250,000, then your deductible loss reported on Schedule A would be $88,000 - $25,000 - $100 = $62,900.