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 disasters in 2016 and 2017, select here for more information on these special provision for a Qualified Disaster Loss that occurred in 2016 and 2017.
Are losses not related to a disaster deductible?
The short answer is NO. The Tax Cuts and Jobs Act of 2017 limited a taxpayer's ability to deduct a casualty loss for any personal casualty and theft loss. Prior to 2018, casualty and theft losses to the home, household items, and vehicles could generally be deducted 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 have been due to a federal declared disaster as determined by the Federal Emergency Management Agency (FEMA).
Claiming a FEMA-declared disaster
A casualty loss is claimed on Form 4684, Casualties 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 starting with either DR or EM qualify. The list of federally declared disaster designation numbers is available at fema.gov/disaster.
If the property is covered by insurance, the taxpayer must file a timely insurance claim for reimbursement of the loss, otherwise they 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 property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake or volcanic eruption. A casualty does not include normal wear and tear or progressive deterioration.
Related expenses, such as expenses for the treatment of personal injuries or for the rental of a car, aren't deductible as casualty or theft losses.
Have the IRS Form 4684 Instructions handy to refer to for help in completing the form.
To enter a casualty or theft loss in TaxSlayer ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Deductions
- Itemized Deductions
- Less Common Deductions
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Casualties and Losses - Enter a description of the loss, the date, and check the check box indicating that the casualty qualifies as a federal disaster. Note that no loss will be allowed unless this box is checked.
Next, enter the FEMA Disaster Declaration Number (letters in all caps), the date it was declared a disaster, and select either Yes or No indicating that qualified disaster loss rules apply (See IRS Form 4684). Click Continue when finished. - Casualty Properties - Select and enter information about the property. A field with an asterisk is required information. If the property is business property, click the check box indicating that and indicate what kind of property it is. Click Continue when finished.
- To enter another property, select + Add a Casualty Property.
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 and theft losses into TaxSlayer ProWeb. This is not intended as tax advice
Additional Information:
IRS: Form 4684, Casualties and Thefts instructions
IRS: Publication 547, Casualties, Disasters, and Thefts
IRS: Tax Topic 515: Casualty, Disaster, and Theft Losses
Form 4684 - Casualty Loss under the Disaster Tax Relief Act of 2017
How Do I Find a FEMA Disaster Designation Number and/or Date?