during the current year, Rulon\'s toilet overflowed because of a major mechanica

Question

during the current year, Rulon's toilet overflowed because of a major mechanical problem. Rulon was outside playing croquet, and bt the time he returned, the water had flooded the basement, causing damage to his carpet, walls, and ceiling. the cost of repairing the damage was $9,000. Rulon has homeowners insurance that will cover half of the damage. However, because he has already had claims this year, Rulon does not want to report the incident to his insurance company for fear of a large increase in his insurance rates. Instead, Rulon wants to deduct the loss as a casualty loss on his tax return. His AGI for the year is $50,000, and he has other itemized deductions of $6,000. Rulon is single. What amount of the casualty loss may he deduct?

Explanation / Answer

Since half of his loss would be covered by insurance and he is not filing an insurance claim, he cannot take half of the loss. For the half he can take, 4500, he must reduce it by 100 and then by 10% of his AGI. 4,500 - 100 - 5,000 = less than zero. So he cannot deduct any of the loss.

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