Casualty and Theft Loss - Is My Property Short Term or Long Term?
When determining whether a casualty or theft loss is short-term or long-term, the key factor is the holding period of the property. According to IRS guidelines, the holding period determines whether the loss is classified as short-term (one year or less) or long-term (more than one year).
Understanding Holding Periods
- Short-term loss: Applies if the property was held for one year or less before the casualty or theft occurred.
- Long-term loss: Applies if the property was held for more than one year before the event.
For example, if you owned a personal vehicle for 18 months and it was stolen, the loss would be considered long-term. If you owned it for only 6 months, it would be short-term.
Reporting Casualty and Theft Losses
Casualty and theft losses are reported on Form 4684, which is used to calculate gains and losses from events such as disasters, thefts, or other sudden, unexpected events. The form includes specific sections for personal-use property (Section A) and business-use property.
- Use Section A of Form 4684 for personal-use property not used in a trade or business.
- Each casualty or theft event must be reported separately on Form 4684 through line 12.
- If more than four items are affected, additional sheets must be used following the format of lines 1–9.
Losses from federally declared disasters may be deductible, but only if they meet specific criteria. For instance, the total loss (after subtracting $100 per event) must exceed 10% of your adjusted gross income (AGI) as shown on Form 1040-NR, line 11b.
Important Notes
- Casualty losses are generally not deductible unless they result from a federally declared disaster (until 2025).
- For personal-use property, you must complete Form 4684 to report the loss. The workbook in Publication 584 provides guidance but is not a substitute for Form 4684.
- Losses from investment property or business use may be reported differently and may require additional forms like Form 4797 or Schedule D.
Source:
Form 4684 - Casualties and Thefts
Publication 584 - Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property)
Disclaimer: Always verify details with official IRS forms and instructions or consult with a tax professional. OLT (Online Taxes) provides guidance based on current IRS publications and forms.