Under current IRS rules (tax years 2018–2025), individuals can only deduct casualty or theft losses for personal‑use property if the loss was caused by a **federally declared disaster area**. Losses from other events are generally not deductible unless a specific capital gain exception applies.
⚠️ Qualifying Events: Federally Declared Disasters Only
Casualty losses (like damage from fire, storm, flood, earthquake, etc.) or theft losses are deductible only when they stem from an event officially declared a federal disaster. Losses from car accidents, vandalism, or non‑disaster theft are not deductible for personal-use property under these rules.:contentReference[oaicite:1]{index=1}
📄 Using Form 4684
- You must file **Form 4684** (“Casualties and Thefts”) to report each qualifying event, separately. Section A is used for personal-use property.:contentReference[oaicite:2]{index=2}
- If you itemize, transfer the allowable loss from Form 4684 to **Schedule A** (line 15 or 16 depending on type of loss).:contentReference[oaicite:3]{index=3}
➖ Loss Calculation Rules
- Deductible loss = lesser of (a) property’s adjusted basis or (b) decrease in fair market value, minus insurance or other reimbursement.:contentReference[oaicite:4]{index=4}
- For each loss event, subtract **$100** from the total.:contentReference[oaicite:5]{index=5}
- Then reduce the total by **10% of your AGI**, unless the loss qualifies as a *qualified disaster loss*.:contentReference[oaicite:6]{index=6}
- For qualified disaster losses, the $100 reduction increases to **$500**, and the 10% AGI floor does **not apply**.:contentReference[oaicite:7]{index=7}
🧾 Filing Flexibility & Timing
- You can claim a qualified disaster loss in either the year it occurred or on your **prior-year return**, maximizing refunds or timing benefits.:contentReference[oaicite:8]{index=8}
- If you missed claiming it originally, you could file an **amended return (Form 1040‑X)** for past years within the window.:contentReference[oaicite:9]{index=9}
🔍 Example Scenario
You live in a federally declared disaster zone and your home and personal items were damaged by a qualifying event:
- Calculated loss after adjusting basis and reimbursements: $50,000
- Subtract $500 per qualified event → $49,500
- No 10% AGI reduction applies → full $49,500 deductible
You can claim this loss even if you take the **standard deduction**, which is highly unusual for Schedule A deductions.:contentReference[oaicite:10]{index=10}
✅ Key Takeaways
- Only casualty/theft losses in **federally declared disaster areas** are deductible for individuals (tax years 2018–2025).
- Use **Form 4684** (Section A) to calculate and report the loss, then transfer it to Schedule A if itemizing—except qualified disaster losses can be claimed even without itemizing.
- Reductions: **$100 per event**, plus **10% of AGI** unless the disaster rules void that floor and raise the $100 deduction to **$500**.
- You may choose to report the loss in the current year or amend previous returns to claim entitled deduction.:contentReference[oaicite:11]{index=11}
If you’ve suffered an event that may qualify, keep documentation: insurance claims, photos, repair estimates, FEMA declarations, and property valuation records. Want help walking through your numbers or the form structure? I’m happy to help!
