If you were mugged and $500 cash and $500 worth of equpiment was taken can you deduct this from your taxes? After all the mugger is required to declare ‘ill gotten gains’ on his taxes, so the IRS should still get their cut. Also if so where do you enter it, do you put in in ill gotten gains as a negative w/ an attched explaination?
You declare your loss as a “casualty loss” on line 19 of 1040 Schedule A and include the details on Form 4684. You can only deduct the loss net of any insurance payout and if somehow you’re insured for more than the cost or basis of the lost goods, you pay tax on your gain instead.
Also, if you don’t itemize deductions you can’t deduct the loss at all, but you still have to report and pay on any gain on the insurance settlement.
The mugger (assuming he’s self-employed, not a W-2 employee of a gang) reports the income on his Schedule C or C-EZ, and for thefts that big, also gives you a 1099 reporting your “payment” to him. Yeah, right. Suuure he does …