Can I deduct the value of my stolen diamond ring?

August 27, 2015 by Dave Du Val, EA
diamond ring

Hey Dave,

While I was working out at the gym, someone broke into my locker and stole my diamond ring. It’s my wedding ring and I always take it off before doing anything that might damage it. My husband paid ten thousand dollars for the ring last year. I filed a police report, but there are no clues about who might have taken it. Can I deduct the value of the stolen ring on my tax return?

Alison

 

Alison,

A theft of property is like a car accident, vandalism, or a weather-related disaster in the sense that it is sudden, unexpected, unusual and beyond our control. Therefore, the theft of your diamond ring does meet the IRS guidelines, and it would be a qualified loss under the Internal Revenue Code and deductible on your personal tax return.

But there is a catch. Personal losses are subject to a ten percent income limitation, so you will have your deductible loss limited to the amount that exceeds ten percent of your income. There is also a $100 limitation on this deduction, and you would need to itemize on Schedule A to receive a benefit.

Another thing to consider when reporting casualty and theft losses is insurance.  If the property was covered by insurance, you must file a claim with the insurance company, and then you would report any excess loss not covered by the insurance company as a deduction on your tax return.

Deductibly Yours,

Dave

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Rhonda D. Guillory, EA
Learning and Development Manager

 

Rhonda was a Seasonal Tax Return Reviewer at TaxAudit before joining the permanent staff as an Audit Representative in 2009. She has a Bachelor of Science in Computer Science and worked in the Information Technology field for 15 years before making a career change. Since transitioning to the field of income tax in 2003, she has prepared and analyzed hundreds of tax returns. Rhonda enjoys helping taxpayers and tax professionals learn and understand the fascinating world of income taxes. Currently, she is the Learning and Development Manager.


 

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