Can I deduct Casualty or Theft Losses on my tax return?

If you have a casualty or theft loss, you may be entitled to a casualty or theft loss tax deduction on your tax return. A casualty loss is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual in nature. It can also be a government-ordered demolition or relocation of a home that's unsafe because of a disaster.

Other examples of casualty losses include car accidents, fires, and vandalism. If your property is covered by insurance, you cannot deduct on your tax return a casualty or theft loss unless you file a timely insurance claim for reimbursement. If insured, a claim must be filed even if no reimbursement is expected.

Some casualty or theft losses are not tax deductible on your IRS tax return, such as the ones below:

People who suffer a casualty or theft loss may be able to deduct on their tax return the casualty or theft loss when they itemize tax deductions on their tax return. The amount of total casualty or theft losses that exceed 10% of adjusted gross income (AGI), after subtracting the $100 floor for each occurrence, maybe deducted on your tax return. It's basically a three step process:

If the casualty loss results from a natural disaster and the President declares your area a disaster area, the casualty loss may be deducted on your tax return within the above limits on this year's tax return or on an amended tax return claiming the casualty loss for last tax year. If a casualty loss was suffered because of a disaster in a designated disaster area, consider amending last year's tax return.

To claim a casualty or theft loss, you must complete Form 4684, Casualties and Thefts, and attach it to your tax return. A nonbusiness casualty or theft loss may be claimed only if you itemize tax deductions on Form 1040, Schedule A.