Reimbursements Tax Laws
Reimbursements and tax laws
You must reduce the amount of your loss by any reimbursement you receive or expect to receive even if you will not receive the reimbursement until a later tax year.
What are the most common type of reimbursements?
The most common type of reimbursement is an insurance payment for your stolen or damaged property.
Reimbursements also include amounts you receive to restore your property from an employer's emergency disaster fund or from relief agencies.
Too little reimbursement
If the reimbursement you receive after you have claimed the tax deduction is less than you expected, you include the difference as a loss on your tax return in the year in which you can reasonably expect no more reimbursement.
Too much reimbursement
If your reimbursement in the later year is more than you expected and your tax deduction reduced your tax for the earlier year, you may have to include the excess reimbursement as income for the year your receive it.
Insurance coverage and loss tax deduction
If you have insurance coverage for your property, you must file a claim. Otherwise, you cannot deduct the loss as a casualty or theft loss. However, you can deduct the portion of the loss that is not covered by insurance even if you do not file a claim.