Personal Casualty and Theft Losses

Which losses qualify

A casualty is damage or loss from a sudden, unexpected event: fire, storm, flood, hail, earthquake, or vandalism. Theft includes burglary, embezzlement, and some fraud. Gradual damage such as termites, mold, or wear doesn’t qualify.

For personal property (your home, car, and belongings), the Tax Cuts and Jobs Act limited the deduction to losses attributable to a federally declared disaster, and the 2025 tax law made that limit permanent. Beginning in 2026, losses from a state-declared disaster (one declared by a governor and meeting federal requirements) also qualify. Personal losses outside a declared disaster, such as a single house fire or a car theft, are generally not deductible, except to the extent you have casualty gains in the same year.

Losses on business or rental property are deductible without the disaster requirement.

Figuring the loss

1. Determine the decrease in fair market value (often from an appraisal or repair cost), and your adjusted basis (what you paid plus improvements).
2. Take the smaller of the two.
3. Subtract insurance and other reimbursements you received or expect to receive. If you have insurance, you must file a claim to deduct the loss.
4. Subtract $100 per event.
5. Subtract 10% of your adjusted gross income from the total for the year.

The deduction is claimed on Form 4684 and Schedule A.

Qualified disaster losses

For losses in major disasters that Congress designates as “qualified,” the rules are more generous: the per-event reduction is $500 instead of $100, there’s no 10%-of-income floor, and you can add the loss to your standard deduction instead of itemizing.

Claiming it a year early

For a loss in a federally declared disaster area, you can choose to deduct it on your return for the year before the disaster. If you’ve already filed that return, you amend it. This can put a refund in your hands when you need it most. The election is due within six months after the regular due date of the disaster-year return.

Insurance payments larger than your basis

If insurance pays more than your basis in the property, you have a gain. Gain can often be postponed by replacing the property within the replacement period (generally two years, four years for a main home in a disaster area). Gain on a destroyed main home may also be excluded under the home-sale rules.

Theft and scam losses

Theft losses from transactions entered into for profit (for example, money lost in an investment scam) may still be deductible outside the disaster rules. These cases depend heavily on the facts. Talk to us before filing.

Documenting a loss

• Photos or video of the property before and after
• Purchase records and receipts for improvements
• Repair estimates or appraisals
• Insurance claim and settlement documents
• The FEMA or state disaster declaration number

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