Itemized Deductions: Casualty and Theft Losses

Understand the rules and limitations for deducting casualty and theft losses on your tax return. This guide explains the criteria for deductible losses, including the requirement that losses must be attributable to federally-declared disasters, and provides a detailed method for calculating the deduction amount. It also covers the specific conditions under which different types of property are considered deductible, as well as the tax treatment of insurance reimbursements and the impact of special disaster relief provisions.

Highlights:

• Federally-Declared Disaster Requirement: Losses must be related to federally-declared disasters to be deductible.

• Loss Calculation: Methodology for determining deductible loss amounts, including adjustments for insurance reimbursements.

• Loss Limitations: Overview of the $100 per event and 10% of AGI limitations on deductible losses.

• Special Disaster Relief: Rules for recognizing gains and losses in disaster areas, and provisions for excluding certain gains from income.