A casualty loss is damage, destruction, or loss of property resulting from a sudden, unexpected, or unusual event. Common examples include:
- Fires
- Hurricanes, tornadoes, and severe storms
- Floods
- Earthquakes
- Shipwrecks
- Other federally declared disasters
A theft loss occurs when property is taken with criminal intent, such as through robbery, burglary, or embezzlement.
These losses are generally reported on Form 4684, Casualties and Thefts.
Can I Claim a Personal Casualty Loss on My 2026 Tax Return?
For tax years 2018 through 2028, personal casualty and theft losses are generally deductible only if they're attributable to a federally declared disaster. This limitation was originally enacted by the Tax Cuts and Jobs Act and later extended by subsequent legislation.
If your loss wasn't connected to a federally declared disaster, you generally can't claim a personal casualty loss deduction.
Business property and income-producing property may be subject to different rules.
What Types of Losses May Qualify?
If the loss resulted from a federally declared disaster, you may be able to claim a deduction for damage or destruction of personal-use property, such as:
- Your home
- Household belongings
- Vehicles
- Other personal property
In some situations, theft losses related to federally declared disasters may also qualify.
Do I Need to File an Insurance Claim?
Yes. If your property was covered by insurance, you must make a timely claim for reimbursement.
You generally can't deduct a loss that insurance would have covered if you chose not to file a claim.
However, any portion of the loss that isn't reimbursed by insurance or other compensation may still qualify for a deduction if all other requirements are met.
What If I Receive an Insurance Reimbursement?
Insurance reimbursements can affect the amount of your deductible loss.
If Your Reimbursement Is Less Than Your Loss
You may be able to deduct the unreimbursed portion of the qualified casualty loss.
If Your Reimbursement Exceeds Your Basis
If your insurance reimbursement exceeds your adjusted basis in the damaged, destroyed, or stolen property, you may have a taxable gain.
In some situations, gain recognition may be postponed if you replace the property with qualified replacement property under IRS rules.
What If I Receive Reimbursement After Claiming a Deduction?
If you deducted a casualty loss in a previous year and later receive reimbursement, you may need to include part or all of that reimbursement as income.
Generally, this applies only to the extent the earlier deduction provided a tax benefit.
Can I Deduct Costs Related to Proving My Loss?
Certain costs incurred to document your loss, such as:
- Appraisal fees
- Professional valuation costs
- Photographs used to substantiate the damage
may help support your claim. However, these expenses aren't reported as casualty losses on Form 4684.
Be sure to follow the IRS instructions for the applicable tax year regarding the treatment of these expenses.
What Losses Can't Be Deducted?
The following losses generally don't qualify for a casualty loss deduction:
- Costs of protecting property from future damage
- Misplaced or lost money or property
- Accidental loss of personal items without a casualty event
- Normal breakage of dishes, glassware, furniture, or household items
- Gradual or progressive damage
Examples of progressive damage include:
- Termite damage
- Moth damage
- Insect infestations
- Rot
- Disease-related damage to plants or trees
- General wear and tear
Because these losses occur over time rather than from a sudden event, they aren't considered casualty losses.
When Should I Claim a Casualty Loss?
Generally, a casualty loss is claimed for the tax year in which the loss becomes deductible.
The timing can vary depending on whether reimbursement is expected.
For example, if a federally declared disaster occurs and you reasonably expect insurance to cover the loss, you may need to wait until it's reasonably certain how much reimbursement you'll receive before determining the deductible amount.
In some disaster situations, special rules may allow you to claim the loss on an earlier year's return by filing an amended return. This election can sometimes provide faster tax relief.
Example
Suppose your home suffers damage from a federally declared disaster.
You immediately file an insurance claim and reasonably expect full reimbursement. The insurance company doesn't settle the claim until the following year and ultimately pays only part of the loss.
In that situation, the year in which the reimbursement amount becomes known can affect when the loss is deductible. Depending on the circumstances and available elections, you may be able to claim the loss on either the disaster-year return or an amended return for a prior eligible year.
How Do I Report a Casualty Loss in the Software?
If you qualify to claim a casualty or theft loss, enter the information in the program under:
- Federal Section
- Deductions – Select My Forms
- Itemized Deductions
- Less Common Deductions
- Casualties and Losses (Form 4684)
If you're unsure whether your loss qualifies, gather any insurance records, disaster-related documentation, and repair information before starting your return. That will make it easier to determine your eligibility and correctly report the loss.