After you have figured the amount of your loss, as discussed earlier, you must figure how much of the loss you can deduct. If the loss was to property for your personal use or your family's, there are two limits on the amount you can deduct for your casualty or theft loss.

1. You must reduce each casualty or theft loss by $100 ($100 rule).
2. You must further reduce the total of all your losses by 10% of your adjusted gross income (10% rule).

You make these reductions on Form 4684.

These rules are explained next, and Table 27-1 summarizes how to apply the $100 rule and the 10% rule in various situations. For more detailed explanations and examples, see Publication 547.

Table 27-1. Deduction Limit Rules

Property used partly for business and partly for personal purposes. When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use portion and for the business or income-producing portion. You must figure each loss separately because the $100 rule and the 10% rule apply only to the loss on the personal-use portion of the property.

$100 Rule

After you have figured the amount of your casualty or theft loss, as discussed earlier, you must reduce that loss by $100. This reduction applies to each casualty or theft loss. It does not matter how many pieces of property are involved in an event; only a single $100 reduction applies.

Example. A hailstorm damages your home and your car. Determine the amount of loss, as discussed earlier, for each of these items. Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100.

Single event. Generally, events closely related in origin cause a single casualty. It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm.

10% Rule

You must reduce the total of all your casualty or theft losses by 10% of your adjusted gross income. Apply this rule after you reduce each loss by $100. If you have both gains and losses from casualties or thefts, see Gains and losses, later in this discussion.

Example 1. In June, you discovered that your house had been burglarized. Your loss after insurance reimbursement was $2,000. Your adjusted gross income is $29,500. You first apply the $100 rule and then the 10% rule. Figure your theft loss deduction as follows.

1.	Loss after insurance	$2,000
2.	Subtract $100	100
3.	Loss after $100 rule	$1,900
4.	Subtract 10% of $29,500 AGI	2,950
5.	Theft loss deduction	-0-

Table 27-2. When to Deduct a Loss

Example 2. In March, you had a car accident that totally destroyed your car. You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Your loss on the car was $1,200. In November, you had a fire that damaged your basement and totally destroyed the furniture, washer, dryer, and other items you had stored there. Your loss on the basement items after reimbursement was $1,700. Your adjusted gross income is $25,000. You figure your casualty loss deduction as follows.

		Car	Basement
1.	Loss	$1,200	$1,700
2.	Subtract $100	100	100
3.	Loss after $100 rule	$1,100	$1,600
4.	Total loss		$2,700
5.	Subtract 10% of $25,000 AGI		2,500
6.	Casualty loss deduction		$200

Losses more than gains. If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. The rest is your deductible loss.

Gains more than losses. If your recognized gains are more than your losses, subtract your losses from your gains. The difference is treated as capital gain and must be reported on Schedule D (Form 1040). The 10% rule does not apply to your losses.

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