What Losses Can I Claim on My Federal Tax Return After My House Burned

by Angela M. Wheeland ; Updated August 24, 2018
Losing your house is stressful, but the IRS can help.

Losing your home to a fire is one of the worst things that can happen. Not only do you lose your house and items inside it, you also lose your sense of security. For 2017, the Internal Revenue Service allows you to deduct, on your income tax return, your losses from a house that burned. Although the deduction won't compensate for your loss of security, it can help to make you financially whole. The new tax bill, applicable for 2018, only allows taxpayers to claim a casualty loss deduction if the damage occurs due to a federally declared disaster. Understanding the tax implications of a house fire can help you plan your recovery as fast as possible.

Claiming Your Losses

Using the casualty and theft deduction, most of your losses are items you can claim on your taxes. As of 2017, you could deduct all but $100 and 10 percent of your adjusted gross income. For example, if there was $50,000 in fire damage and you had $85,000 in adjusted gross income, you could deduct $41,400, or $50,000 minus the $100 deduction and $8,500 for the 10 percent of your adjusted gross income. To claim this deduction, you must itemize. The amount of your deduction reduces your income dollar for dollar. If you have more than one loss in a tax year, you must deduct $100 and 10 percent of your adjusted gross income from each income tax fire loss.

Starting Your Deduction

Typically, you can deduct on your income tax fire loss such as items in your home and vehicles damaged by the fire. You can't deduct the loss if it's reimbursed by insurance, unless you still have a loss after payment from the insurance company. A casualty or loss is typically deductible in the year the loss occurred. If the amount of your loss is more than your income, you have a net operating loss, which you can carry forward to future tax returns or can use to amend a past return and receive a refund. You don't have to own a business to have a net operating loss.

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Filing For Your Deduction

To claim the loss deduction while filing taxes after house fire scenarios, you must file Form 1040, Schedule A and Form 4684. Using Form 4684, enter the cost or other basis of your home, which is the original price plus any improvements before your house burned. Hire an appraiser or insurance adjuster to determine the cost or other basis. Subtract any reimbursements from your insurance. If the amount reimbursed is more than the cost or other basis of your house, you have a gain that you must include as taxable income. Subtract the $100 nondeductible portion and 10 percent of your adjusted gross income to determine your deductible amount. Report this amount on Schedule A, and complete the form to figure your total itemized deductions. Enter this amount on the "Itemized Deductions or Standard Deduction" line on Form 1040.

If the amount of your itemized deductions exceeds your income, you can carry forward or carry back the additional amount. By carrying back, you change a previous year's income tax return to claim a refund. You can claim a net operating loss on Form 1045 or Form 1040X. The refund from Form 1045 is much faster than amending a tax return with Form 1040X. But to use Form 1045, you must claim the loss within one year from the end of the tax year of the net operating loss. For example, if you had a net operating loss in 2017, you have until Dec. 31, 2017 to file Form 1045 for a carry back refund for 2016. After that you'd have to file an amended tax return using Form 1040X, which you can amend up to three tax years to receive a refund. If you carry forward the net operating loss to a future tax year, you enter the loss as a negative figure in the "Other Income" section on Form 1040. Attach a statement to your tax return outlining the loss, including all calculations.

About the Author

Angela M. Wheeland specializes in topics related to taxation, technology, gaming and criminal law. She has contributed to several websites and serves as the lead content editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and criminal justice. She has owned and operated her own income tax-preparation business since 2006.

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