Casualty/Theft Loss - Form 4684

The tax year in which a casualty occurs determines the treatment of that casualty on the tax return. Some federally declared disasters in 2016 and 2017 have special provisions made for them. 

A taxpayer’s ability to deduct a casualty loss for a casualty or loss they suffered got limited by the Tax Cuts and Jobs Act. Before 2018, casualty losses to your home, household items and vehicles could be deducted from your federal income tax return when the casualty or loss was not connected to a federally declared disaster. However, as from 2018, a loss must be a Disaster Loss that happened in an area determined by the President, it must warrant a disaster assistance and is declared a federally declared disaster for one to claim a casualty loss. 

Form 4684 - Casualty and Thefts, is used to claim Casualty loss. Casualty Loss is reported as itemized deduction on Schedule A. For a taxpayer to claim a casualty loss, it is mandatory that they report the right FEMA disaster declaration number for the Zip Code for the affected property. FEMA codes that have the alpha designation of “DR” or “EM” are the only ones that qualify. The list of designation numbers of federally declared disasters are available at FEMA.gov/Disaster.

 In the event that you have an insurance cover for your property, to get a reimbursement for your loss, you will have to file a timely insurance claim for it. The loss cannot be deducted as a casualty or theft. However, you may still deduct the portion of the loss not covered by the insurance. The damage, destruction or loss of property due to an abrupt, unexpected or odd event such as an earthquake, flood, tornado etc may be considered a casualty loss. Normal wear and tear as well as progressive deterioration do not qualify as casualty losses. Illegally taking and removing of money or property with the intention (criminal intention) of depriving the owner of the money or property is referred to as theft.  

Related Expenses - Expenses connected to a casualty or theft, such as funds for treatment of personal injuries or car renting are not deductible as casualty or theft losses. 

To enter a Casualty or Theft Loss in the tax program; 

• Go to the Main Menu of the tax return (Form 1040) 
• From the menu, select Itemized Deductions 
• Then Casualty/Theft Loss (4684)
• Select New then enter a description of the casualty or theft, the date of the loss, FEMA Disaster Designation Number and the Date of the Disaster Designation. The Qualified Disaster Loss Rules Apply box needs to be checked in the event that the special provision for the Qualified Disaster Loss applies because the disaster is of either 2016 or 2017. 
• Click Enter, then; 
• Select Section A for Personal Property for property used for income generation purposes in a trade or business. Section A also determines the casualty or theft losses and gains connected to the part of your home utilized for business in case the simplified method was used to figure out your deductible expenses for business use of your home. 

Or

Select Section B for Business Property to determine casualty or theft losses and gains for property used for trade or business or income generating activities. In case property is used partly for trade and partly for personal purposes, figure the personal portion in Section A and the business portion in Section B. 

• Select New 
• Enter every required information in the Personal Use Information Menu. For information on what to enter on each line, check page 3 of the Instructions for Form 4684. The calculated deduction is taken to the appropriate Schedule A line. 

Casualty or theft losses from personal use of property can be deducted only to the extent that the loss from every casualty or theft exceeds $100 and the sum of all losses throughout the year exceeds 10% of your AGI. 

Additional Information:

Instructions for Form 4684, Casualties and Thefts

Publication 547, Casualties, Disasters, and Thefts

Tax Topic 515, Casualty, Disaster, and Theft Losses