Letters: Can I deduct a lost diamond bracelet from my taxes?

ByThomas J. Pawlak

Mar 15, 2013

Louis Barajas, a certified financial planner and author of several books including “My Street Money,” joins guest host David Lazarus this week to answer your questions about personal finance.

Bonny from Tallahassee, Florida lost a diamond bracelet this year. He was uninsured and she wants to know if she can deduct part of this loss from her federal income tax. The bracelet was purchased in 1988 for approximately $ 4,500.

“A lot of people don’t realize that even if they have a certain piece of jewelry and lose it or have it stolen, they can still go through their home insurance policy and get anything for it. this, “says Barajas, warning that at some point Bonny should have detailed the bracelet and informed the insurer. “If you don’t have it, you will need to complete Form 4684, which pertains to loss of life.”

But Barajas says that while she can deduct the loss, she probably won’t be able to.

“You have to subtract $ 100 from the top of what you have. So now all of a sudden your loss is $ 4,400. Then you need to take 10 percent of your adjusted gross income for the year. So for 2012, if you and your husband made $ 50,000, 10% of $ 50,000 – I’m not making that up – is $ 5,000. This bracelet would not be deductible because all it would have is a loss of $ 4,400. It would have to be over $ 5,000. It must therefore be 10% higher than your adjusted gross income. So you can claim it, but most people don’t get the deduction.

To hear more tax advice on claiming property as a loss and to find out how certain IRS documents got their names and numbers, click play on the audio player above.

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