If you've suffered the results of a theft, accident, fire, flood, or some other casualty during the year, you may be able to deduct some of your unreimbursed losses.
Casualty losses are treated somewhat differently depending on whether the loss occurred to property used in your trade or business, property used to generate investment income, or property used 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.
In order to understand and claim a casualty loss on your tax return, you need to know:
- What is a casualty?
- How do you measure a casualty loss?
- How do you prove a loss to the IRS?
- How do you handle insurance reimbursements?
- How do you calculate the tax deduction?
- Can you actually have a casualty gain?
- How do you report a casualty gain or loss on your tax return?