Question

Greg and Marsha's home in Santa Barbara was completely destroyed by fire. The house was not insured because they did not have a mortgage requiring insurance coverage. How do Greg and Marsha report their loss?

A. On Form 4684, Casualties and Thefts and Form 1040, U.S. Individual Income Tax Return, as an adjustment to income.
B. Only on Schedule A, Itemized Deductions.
C. On Form 4684, Casualties and Thefts, and Schedule A, Itemized Deductions.
D. Only on Form 4684, Casualties and Thefts.

Answer 1

Greg and Marsha should report their home fire loss on Form 4684, Casualties and Thefts, and Schedule A, Itemized Deductions, if it is related to a federally declared disaster.

Step-by-step explanation:

When Greg and Marsha’s home in Santa Barbara was destroyed by fire and they had no insurance since a mortgage was not mandating coverage, they would need to report their loss on Form 4684, Casualties and Thefts, and Schedule A, Itemized Deductions. This information is used to calculate any deductible loss that may reduce their taxable income on their Form 1040, U.S. Individual Income Tax Return. It should be noted that due to tax law changes such as the Tax Cuts and Jobs Act, deductions for personal casualty and theft losses are limited to federally declared disasters. Therefore, it is important to verify if the fire was part of such a disaster declaration to make a proper claim.