Letters: Can I deduct a lost diamond bracelet on my taxes?
A U.S. Postal Service letter carrier prepares to place letters in a mailbox.
Louis Barajas, a certified financial planner and author of several books including "My Street Money," joins guest host David Lazarus this week to answer your personal finance questions.
Bonny from Tallahassee, Fla., lost a diamond bracelet this year. It was not insured and she wants to know if she can deduct any of that loss on her federal income taxes. The bracelet was bought in 1988 for about $4,500.
"A lot of people don't realize that even though they have a certain piece of jewelry and they lose it or it gets stolen, they can still kind of go through their homeowners insurance policy and get anything for it," says Barajas, cautioning that at some point Bonny might have had to itemize the bracelet and let the insurer know about it. "If you don't have that, you're going to have to fill out form 4684, which is for casualty loss."
But Barajas says that even though she can deduct the loss, she probably won't be able to.
"You have to subtract $100 right off the top of what you've got. So now all of a sudden your loss is $4,400. Then you've got to take 10 percent of your adjusted gross income for the year. So for 2012 if you and your husband earned $50,000, 10 percent of $50,000 -- I'm not making this number up -- is $5,000. This bracelet wouldn't be deductible because all she would have is a $4,400 loss. It'd have to be over $5,000. So it's got to be 10 percent over your adjusted gross income. So you can claim it, but most people don't get the deduction."
To hear more tax-related advice on claiming property as a loss and to hear how certain IRS documents got their names and numbers, click play on the audio player above.