When you purchase homeowner's insurance, you have to select a deductible. The higher the deductible you select, the lower the price of the policy. However, when you have a loss, paying the amount of the deductible out of your pocket can be a significant loss. There is a place on your tax form to recoup some of the loss, but you have to itemize your deductions.
Your deductible is the amount the insurance company takes off the claim. You pay it first out of pocket before the insurance company pays for any of the claim. However, to deduct it from your income taxes, you have to know how much your total loss is for the year. If your insurance company hasn't settled your claim by the end of the year and you don't know the extent of the reimbursement, you can carry it over until you do know the exact amount of loss.
Where You Put It
When you want reimbursement for an insurance deductible, you have to itemize your tax deductions. The amount goes under "Casualty and Theft Losses" on schedule A of your tax form. However, if you don't have itemized deductions of at least $5,700 if you're single, $11,400 if you're married filing jointly or $8,400 as head of the household, you end up paying more tax. These amounts are the standard deductions you receive without itemizing.
There are required minimums when you file a loss on schedule A. The loss must be at least $100. If you have more than one loss during the year, each one must be at least $100 for you to deduct it. The amount minus the $100 limit also must be larger than 10 percent of your adjusted gross income found on both line 37 and line 38 of the 2010 tax form. If your adjusted gross income is $30,000 for the year and your deductible is $500, it's more than the $100 minimum for a loss, but the $400 remaining is not more than $3,000, which is 10 percent of your adjusted gross income. You can't take a deduction in this case.
Use the Worksheet
You might be able to add to the amount you lost by using form 4686, the Casualties and Thefts worksheet. If the insurance company didn't pay for your entire loss, you can add the amount the insurance did not cover to the amount of the loss, and you might have enough to deduct for tax purposes. For instance, if you insured a new home for only 50 percent of the replacement cost instead of 80 percent and incurred a $10,000 loss, you wouldn’t receive that entire amount. The insurance company would calculate the loss, subtract 50 percent from that amount, and then subtract the deductible. If the deductible amount is $500, you'd pay out of pocket $5,500, which is enough to receive a tax deduction if your adjusted gross income is the $30,000 mentioned in the previous section.