Casualty Losses

Charlene M. Ives, CPA, PC

Charlene M. Ives, CPA, PC

The tax deduction for casualty losses is for taxpayers who itemize their deductions.

Here are the general rules:

  • The loss is generally allowed only for the tax year in thich the loss is sustained, with an exception for certain disaster losses
  • The amount of the loss is the decrease in the fair market value of the property, limited to the adjusted basis of the property. Property that has been already been deducted for tax purposes (for example claimed as a business deduction) cannot be claimed again as a casualty loss.
  • Two limitations to the tax deduction apply: First, the loss is allowable for the amount that exceeds $100; second, the loss is allowable for the amount that exceeds 10% of adjusted gross income.

Casualty losses are rported on Schedule A to Form 1040. The taxpyaer must also complete Form 4684 Casualties and Thefts.

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