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21lincoln
New Member

Can I claim the deduction of my insurance when a pipe burst in my house?

 
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Accepted Solutions
rjs
Level 15
Level 15

Can I claim the deduction of my insurance when a pipe burst in my house?

Do you mean the insurance deductible that you had to pay? The terminology is a little confusing here. A deductible is an amount that you have to pay before your insurance covers the damage. A deduction is an amount that is subtracted from the taxable income on your tax return.

If this happened in 2017 (or earlier), theoretically you could claim a tax deduction for a casualty loss, but there are a lot of limitations, so the deduction might not amount to anything. First of all, the loss that you can claim on your tax return is only the amount that was not reimbursed by insurance. So you could claim the amount of the insurance deductible. In calculating the deduction for a casualty loss, you first have to subtract $100 from the unreimbursed amount of the loss. Then you have to subtract 10% of your Adjusted Gross Income (AGI). What's left after those subtractions is the amount you can deduct.

For example, suppose your insurance deductible is $2,000 and your AGI is $18,000. Subtracting $100 leaves $1,900. 10% of your AGI is $1,800. So the amount you can deduct on your tax return is only $100 ($1,900 - $1,800). If your AGI was $19,000 or more you would have no tax deduction.

If you still have something to deduct, a casualty loss is an itemized deduction. To get any tax benefit from the deduction, your total itemized deductions, including the deductible portion of the casualty loss, have to be more than your standard deduction.

If you think you can take a tax deduction for the casualty loss, see IRS Publication 547 for more details about the deduction, including the proof of loss that you will need. You can download Pub. 547 from the following link.

http://www.irs.gov/pub/irs-pdf/p547.pdf

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2 Replies
rjs
Level 15
Level 15

Can I claim the deduction of my insurance when a pipe burst in my house?

Do you mean the insurance deductible that you had to pay? The terminology is a little confusing here. A deductible is an amount that you have to pay before your insurance covers the damage. A deduction is an amount that is subtracted from the taxable income on your tax return.

If this happened in 2017 (or earlier), theoretically you could claim a tax deduction for a casualty loss, but there are a lot of limitations, so the deduction might not amount to anything. First of all, the loss that you can claim on your tax return is only the amount that was not reimbursed by insurance. So you could claim the amount of the insurance deductible. In calculating the deduction for a casualty loss, you first have to subtract $100 from the unreimbursed amount of the loss. Then you have to subtract 10% of your Adjusted Gross Income (AGI). What's left after those subtractions is the amount you can deduct.

For example, suppose your insurance deductible is $2,000 and your AGI is $18,000. Subtracting $100 leaves $1,900. 10% of your AGI is $1,800. So the amount you can deduct on your tax return is only $100 ($1,900 - $1,800). If your AGI was $19,000 or more you would have no tax deduction.

If you still have something to deduct, a casualty loss is an itemized deduction. To get any tax benefit from the deduction, your total itemized deductions, including the deductible portion of the casualty loss, have to be more than your standard deduction.

If you think you can take a tax deduction for the casualty loss, see IRS Publication 547 for more details about the deduction, including the proof of loss that you will need. You can download Pub. 547 from the following link.

http://www.irs.gov/pub/irs-pdf/p547.pdf

rjs
Level 15
Level 15

Can I claim the deduction of my insurance when a pipe burst in my house?

The new tax law eliminates the deduction for casualty losses, except for federally declared disasters. So if this happened in 2018 you cannot claim a tax deduction for it.
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