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After filling out and submitting IRS Form 4684 with our 2011 Income Tax Return, how much of our $7,593.00 can we expect to receive? Also, will we increase our chances of the IRS conducting an audit of our return by filing the extra Form 4684?
Hi and welcome to JustAnswer! To claim that deduction – you should itemize on the schedule A - if you do not itemize - there is no deduction. In additional - you must subtract $500 from each casualty, and subtract 10% of your adjusted gross income from that total to calculate your allowable casualty losses for the year – so your actual deduction will be less than the full amount of your loss. As a result - your taxable income will be reduced by $7,593 - $500 - 10% of your AGI. Your actual tax saving will be based on your tax bracket - this if you are in 25% marginal tax bracket - that will be your saving. Yes - deducting Casualties, Disasters, and Thefts losses will increase your chances to be audited. But we never know if it will trigger the actual audit or not.
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