The IRS doesn’t generally allow you to claim a deduction for losses that relate to personal property you own such as your jewelry. However, there is an exception when your jewelry is stolen. The amount of loss you can deduct on your jewelry is subject to some reductions and is only available if you are eligible to itemize your deductions.
Deductible Jewelry Thefts
The IRS allows you to deduct certain theft losses on your tax return. But before you claim a deduction, you must ensure that your jewelry is actually stolen and not lost. Generally, your loss must be the result of another person’s criminal intent to deprive you of the jewelry, though it’s not necessary that the person be convicted or that you even be able to identify the thief. Common occurrences of deductible theft losses include burglaries, blackmail, extortion, robbery and even providing the jewelry as ransom if you or someone close to you is kidnapped.
Proving Your Loss
You cannot reduce your tax bill for your stolen jewelry unless you can provide some proof to the IRS that a theft actually occurred. You must be able to recall the time of theft, that you had no control over the situation, that you are the true owner of the jewelry and whether you expect to receive a reimbursement. The IRS wants to be sure that you have no doubts as to whether the jewelry was actually stolen; not being able to recall the precise moment the jewelry was stolen may create some doubt. Any proceeds you receive from an insurance company will require you to reduce your deduction by the amount of the reimbursement.
Calculating the Loss
Before you calculate your deduction, you must determine exactly what your monetary loss is as a result of the theft. You cannot include amounts for other expenses you incur that relate to the incident. The IRS requires you to calculate the loss as the smaller of what you originally paid for the jewelry or the decrease in fair market value as a result of the theft. Since you no longer have possession of the jewelry, the decrease in value is the price you can sell the jewelry for on the day it was stolen. Unless the jewelry depreciates in value from the time you purchased it, you will use your cost as the loss.
Calculating the Deduction
Once you determine the value of your loss, the amount is subject to two reductions to arrive at the deductible amount. First, you reduce your total jewelry loss resulting from the theft by $100. From this amount, you must then subtract 10 percent of your Adjusted Gross Income (AGI). The result is the amount of your tax deduction. You will find your AGI at the very bottom of the first page to your Form 1040. This is equal to your gross income minus certain adjustments to income before claiming exemptions and other deductions.
Jeff Franco's professional writing career began in 2010. With expertise in federal taxation, law and accounting, he has published articles in various online publications. Franco holds a Master of Business Administration in accounting and a Master of Science in taxation from Fordham University. He also holds a Juris Doctor from Brooklyn Law School.