Topic No 515 Casualty, Disaster, and Theft Losses Internal Revenue Service

Last Updated on August 13, 2022

Casualty And Theft Losses Definition

The $100 and 10 percent of AGI reduction applies only to the personal portion of the loss. Some special considerations apply in the case of home offices. Casualty losses are treated differently depending on whether the loss occurred to property used in your trade or business, to generate investment income, or for personal or family purposes. However, regardless of the type of property, the loss must first be reported on IRS Form 4684, Casualties and Thefts. For that reason we’re going to discuss all types of casualties, both business and personal, in the following section. If the insurance or other reimbursement turns out to be less than you expected, you can claim a loss the year you determine you’ll receive no further reimbursement. Don’t amend your original return for the prior year.

Take the smaller number and subtract the insurance proceeds. You end up with a gain for which you must account if you were reimbursed for more than the loss. You must have incurred a casualty loss due to a natural disaster such as a hurricane, flood, wildfire or tornado for tax years 2018 through 2025. The U.S. president must have issued a formal disaster declaration for the event. This can be an emergency declaration that originated from the state governor or a major disaster declaration issued by the president directly. The IRS considers a casualty loss as one that comes from an unexpected event such as a natural disaster rather than typical deterioration over time. It considers a disaster loss to be one stemming specifically from a presidentially-declared national disaster.

How to get a copy of your California tax return

This results because you didn’t deduct any loss and the insurance payment does not exceed the actual amount of the loss. If the destroyed property was used in a business or to produce income, you must use the property’s adjusted tax basis after the loss, minus any salvage value. For business property, the fair market value does not come into play at all. If the property was totally destroyed in a casualty, rather than just damaged, the value of the loss depends on whether the property was business or personal-use property. If it was used for personal purposes, the rule stated above for damaged property still holds.

  • However, commuting or driving from one business to another business is considered personal driving, and is, thus, subject to the personal driving rules.
  • These other itemized deductions have their own rules and limits, so it can definitely be worth it to consult with a professional.
  • This page automatically loads a list of the most recent declared disasters with options to sort through several pages.
  • The student will be required to return all course materials, which may be non-refundable.
  • We will replace your lost or damaged California tax returns at no cost to you.

However, after you make the choice, you can’t change it without permission from the IRS. Theft losses are generally deductible in the year you discover the property was stolen unless you have a reasonable prospect of recovery through a claim for reimbursement.

Interest claim limitation periods, including for ‘net rate’ netting claims

An event does not need to be an act of nature in order for it to be deemed a casualty loss. In Carpenter v. Commissioner, the taxpayer accidentally dropped a diamond ring down the garbage disposal. The United States Tax Court ruled that the accidental destruction of the diamond ring was a casualty loss and, therefore, deductible. If your loss deduction is more than your income, you may have a net operating loss . You don’t have to be in business to have an NOL from a casualty.

According to §62, only losses from Sale or Exchange are above the line. Other losses are usually “regular itemized deductions” if included in §67’s exceptions. Damage incurred to property due to sonic booms is deductible if the boom is declared a federal disaster, perhaps caused by low-flying, supersonic enemy warplanes. Authorized refund or credit of overpayment attributable to the amendments made by subsec.


A lack of rain kept fires burning there for more than two weeks putting more than 2,000 homes danger, especially along U.S. 17. Forms, publications, and all applications, such as your MyFTB account, cannot be translated using this Google™ translation application tool. For forms and publications, visit the Forms and Publications search tool. We cannot guarantee the accuracy of this translation and shall not Casualty And Theft Losses Definition be liable for any inaccurate information or changes in the page layout resulting from the translation application tool. This Google™ translation feature, provided on the Franchise Tax Board website, is for general information only. Consult with a translator for official business. You must request us to stop accruing interest on taxes you owe in writing by completing Request for Abatement of Interests .

Casualty And Theft Losses Definition

Faster access to funds is based on comparison of traditional banking policies for check deposits versus electronic direct deposit. For tax years beginning after 2017, applicants claimed as dependents must also prove U.S. residency unless the applicant is a dependent of U.S. military personnel stationed overseas. A passport that doesn’t have a date of entry won’t be accepted as a stand-alone identification document for dependents. H&R Block provides tax advice only through Peace of Mind® Extended Service Plan, Audit Assistance and Audit Representation. If H&R Block makes an error on your return, we’ll pay resulting penalties and interest.

We Care!

Under Internal Revenue Code Section 1001 all realized losses are deductible except as otherwise not allowed in the Code. For individuals, deductions are mainly limited by Internal Revenue Code Section 165 . Deductions for losses are limited to 1) those incurred in a trade or business; 2) those incurred in any transaction entered into for profit; and 3) those personal losses that arise from fire, storm, shipwreck, or other casualty, or from theft. So, in order for an individual to be able to deduct a personal loss, meaning a loss not arising from a business pursuit or a transaction intended to make a profit, the loss must be caused by fire, storm, shipwreck, or other casualty, or theft. While fire, storm, and shipwreck are recognizable and fairly definable, determining what constitutes “other casualty” is less sure.

About the author

The Editorial Team at is dedicated to providing the best information on learning. From attaining a certificate in marketing to earning an MBA, we have all you need. If you feel lost, reach out to an admission officer.
Study on Scholarship Today -- Check your eligibility for up to 100% scholarship.

Leave a Comment