Dear Tax Talk,

My credit cards were stolen. I lost $14,841. Can I claim it as a deduction for income tax?

— Martin

Dear Martin,

If your credit cards are stolen, you can claim a theft loss for tax purposes. If they’re lost, it is hoped you’ll find them before they’re stolen. For tax purposes, a theft loss is treated similar to a loss from a casualty, such as a hurricane.

For a theft loss, you should be able to show all the following:

  • When you discovered that your property was missing.
  • That your property was stolen.
  • That you were the owner of the property.
  • Whether a claim for reimbursement, for which there is a reasonable expectation of recovery, exists.

The first three factors are fairly easy to prove in the case of the fraudulent charges. Usually, credit card issuers limit the cardholder’s liability in the case of theft. You would need to show why this is not the case in your situation and that you have no expectation of recovery.

Further, if your loss is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Otherwise, you cannot deduct this loss as a theft.

You should also consider filing a police report. This will help support your deduction in the event that it is examined.

You would deduct the loss on Form 4684. Your loss is subject to reductions to arrive at your deductible loss. You first reduce your loss by $100. Next, you reduce the loss by 10 percent of your adjusted gross income, or AGI. If in your situation you have an AGI of around $150,000, you will not have a deductible loss. If you have a deductible loss, the loss is claimed together with your other itemized deductions on Schedule A.

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To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

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