The treatment of a casualty on the tax return depends on the tax year in which the loss occurs, and there are special provisions for certain federally declared disaster in 2016 and 2017. For more information on these special provision for a Qualified Disaster Loss that occurred in 2016 and 2017, see Form 4684 - Casualty Loss under the Disaster Tax Relief Act of 2017.
The Tax Cuts and Jobs Act limited a taxpayer's ability to deduct a casualty loss for any personal casualty and theft loss. Generally, prior to 2018, you could deduct casualty and theft losses to your home, household items and vehicles on your federal income tax return when the loss was not associated with a federally declared disaster. However, starting in 2018, in order to claim a casualty loss, the loss must be considered a Disaster Loss and have occurred in an area determined by the President to warrant disaster assistance and then is declared a federally declared disaster.
Casualty loss is still claimed on Form 4684 - Casualty and Thefts, and is reported on Schedule A as an itemized deduction. The taxpayer must report the appropriate FEMA disaster declaration number for the Zip Code for the property affected by the disaster in order to claim a casualty loss. Currently only FEMA codes with the alpha designation of either "DR" or "EM" qualify. The list of federally declared disaster designation numbers is available at FEMA.gov/Disaster.
If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Otherwise, you can't deduct the loss as a casualty or theft loss. However, the part of the loss that isn't covered by insurance is still deductible. A casualty loss can result from the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption. A casualty does not include normal wear and tear or progressive deterioration. A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and it must have been done with criminal intent.
Related expenses. The related expenses you have due to a casualty or theft, such as expenses for the treatment of personal injuries or for the rental of a car, aren't deductible as casualty or theft losses.
To enter a Casualty/Theft Loss in the tax program, from the Main Menu of the Tax Return (Form 1040) select:
- Itemized Deductions Menu
- Casualty/Theft Loss (4684)
- Select New, enter a description of the casualty or theft, date of the loss, FEMA Disaster Designation Number and the Date of the Disaster Designation. If the special provisions for a Qualified Disaster Loss apply due to the disaster being one of the 2016 or 2017 disaster, the Qualified Disaster Loss Rules Apply box should be checked.
- Select, Enter, then
Select Section A for Personal Property for property that isn't used in a trade or business or for income-producing purposes. Also use Section A to figure casualty or theft losses and gains related to the portion of your home used for business if you used the simplified method to determine your deductible expenses for business use of your home
Select Section B for Business Property B to figure casualty or theft gains and losses for property that is used in a trade or business or for income-producing purposes. If property is used partly in a trade or business and partly for personal purposes, such as a personal home with a rental unit, figure the personal part in Section A and the business part in Section B.
- Select New
- Enter all information in the Personal Use Information Menu. See page 3 of the Instructions for Form 4864 for details on what to enter on each line. The calculated deduction will flow back to the appropriate line of Schedule A.
Casualty or theft losses of personal use property are deductible only to the extent that the amount of the loss from each separate casualty or theft is more than $100 and the total amount of all losses (as so reduced) during the year is more than 10% of your AGI (Adjusted Gross Income).
NOTE: This is a guide on entering Casualty/Theft Loss into the TaxSlayer Pro program. This is not intended as tax advice. For additional information, refer to the Additional Information links below.