How to Claim a Fire Loss in Taxes

You can't deduct any damage your insurer pays off.
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You can write off casualty losses, such as home fires, on your taxes, provided you itemize. First you figure out your losses using Internal Revenue Service Form 4684, then report the deductible figure on Schedule A. If you take the standard deduction instead of itemizing, you're out of luck. You can only deduct losses that weren't reimbursed. If, say, you suffer $50,000 in fire damage but your insurer cut you a check for $40,000, the most you can write off is $10,000.

Loss of Home

Your deduction is based on how much the fair market value of your property fell after the fire. If your house burns to the ground, say, the fair market value of the property becomes zero. If your house has grown in value so the loss is greater than your "basis" in the house -- typically equal to your purchase price -- you can only write off the basis. When the house survives with partial damage, you can use the cost of repairs or an appraiser's estimate to figure the loss.

Personal Possessions Destroyed

You use the loss in value or the original basis to figure your loss on personal possessions destroyed in the fire. "Consumer Reports" says you should document your losses for the IRS the same way you would for an insurer, with receipts or photographs. If you lost something rare, such as a work by Picasso, you may need an appraiser's report to confirm the size of your loss. Ignore any sentimental attachment you had to your stuff; the only thing the IRS cares about is the fair market value.

Limits on Losses

After you've figured your total unreimbursed losses from the fire, subtract $100 from that figure. It doesn't matter how big the loss is or how many items were damaged. If you have other casualty losses, you subtract $100 from each of them. The next step is to add all the losses together, then subtract 10 percent of your adjusted gross income. Whatever remains is your actual tax write-off on Schedule A.

Insurance Reimbursements

If your property is insured but you don't file a claim, you can't claim the damage as a tax loss, except for the insurance deductible. "Reimbursement" only includes payments compensating you for the loss from the fire. If, say, your policy covers the cost of living in a hotel for a month while your home is repaired, that's not a reimbursement. You have to deduct all kinds of reimbursement from anything you want to deduct -- for example, your employer's disaster-relief fund -- not just insurance settlements.

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