Can I Take a Deduction for Casualty and Theft Losses?
Casualty and theft losses may be deductible under certain conditions, but the rules are strict and depend on whether the loss resulted from a federally declared disaster.
General Rules for Casualty and Theft Losses
- Only casualty losses from federally declared disasters are deductible for personal-use property until 2025.
- Losses from other causes (e.g., storms, fires, thefts not tied to a federal disaster) are generally not deductible unless you have personal casualty gains reported on Form 4684, line 13.
- If you have personal casualty gains, you may deduct personal casualty losses up to the amount of those gains.
How to Claim the Deduction
- Complete Form 4684 to report casualty and theft losses.
- Use Section A of Form 4684 for personal-use property (not used in a trade or business or for income-producing purposes).
- Each separate casualty or theft loss must exceed $100 to be considered.
- The total of all losses (after subtracting $100 per event) must exceed 10% of your adjusted gross income (AGI) shown on Form 1040, line 11b, to qualify for a deduction.
Special Considerations for Rental Property
- If you own rental property, you may use a worksheet version of Section A of Form 4684 to calculate losses, treating them as personal expenses.
- For itemizers, enter 10% of your AGI (excluding rental income/losses) on line 17 of the worksheet.
- Only the rental portion of losses from federally declared disasters can be included in your deduction calculation.
Important Notes
- You must itemize deductions to claim casualty and theft losses.
- The worksheet version of Form 4684 is for recordkeeping only — do not file it. Complete a separate Form 4684 to attach to your return.
- For more details, refer to IRS Publication 547, “Casualties, Disasters, and Thefts.”
Source:
Form 4684 - Casualties and Thefts
Publication 527 - Residential Rental Property
IRS Forms, Instructions, and Publications
Disclaimer: Always verify details with the official Federal or State Department of Revenue Forms and Instructions before filing your tax return.