Are Theft Losses deductible?
What is the IRS definition of Theft?
The IRS has actually defined theft loss as "the taking and removing of money or property with the intent to deprive the owner of it. The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent."
Additionally, the IRS has defined theft as including the taking of money or property by the following means:
Kidnapping for ransom.
Thus specifically in your case the "Burglary" meets the definition of theft.
How much can you deduct on your tax return?
Per IRS tax code, the "casualty and theft" losses are limited by an $100 threshold per loss event and an overall threshold of 10% of your adjusted gross income (AGI). This means that the casualty loss is deductible to the extent that it exceeds $100 per loss event, and to the extent that it exceeds 10% of your AGI.
Lets say, that your theft loss resulted in 2 items stolen, a uninsured Big Screen TV and an uninsured laptop computer were stolen. Assume the Big Screen TV was was worth $3,500, then applying the $100 limitation, we have a loss of $3,400. The Laptop was worth $1,800 and so after applying the $100 limitation, the loss is $1,700. This results in a combined loss of $5,100.
Furthermore, lets assume your adjusted gross income is $45,000. The calculations would go like this:
1. Event 1 Stolen Big Screen TV ($3,500 - $100) = $3,400
2. Event 2 Stolen computer ($1,800 - $100) = $1,700
3. Total Losses ($3,400 + $1,700) = $5,100
4. 10% Threshold ($45,000 AGI x 10%) = $4,500
5. Deductible Losses ($5,100 - $4,500) = $600
Thus, you would be able to report $600 of "casualty and theft losses" on Form 4684 for tax year 2007.