Can You Get a Tax Deduction for a Theft Loss?

Maybe.  Personal theft losses are lumped in with personal casualty losses from natural disasters and other events.  A theft is defined as the taking and removal of money or property with the intent to deprive the owner of it.  It must be illegal under the laws of the state where it occurred and one with criminal intent.

Now, you need to clear two hurdles before you are entitled to a deduction:
1.  Your annual deduction for personal casualty and theft losses is limited to the excess of total losses above 10% of your adjusted gross income (AGI).
2.  For this purpose, each separate casualty and theft loss is reduced by $100.

If, for example, you lose $12,000 of property in the burglary and your AGI is $100,000, your theft loss deduction is limited to $1,900 ($12,000 less $10,000 (the 10%) minus $100).

The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero.  Additionally, the deductible amount must be reduced by insurance proceeds.

NOTE:  There are not deduction limits for thefts of business property.

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