Casualty losses that are specifically allowed by the IRS include damage caused by fire, earthquake, government-ordered demolition or relocation of a home rendered unsafe due to a disaster, mine cave-ins, shipwrecks, sonic booms, storms, terrorist attacks, vandalism and volcanic eruptions. (Photo: Shutterstock)
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Editor's note: Under the 2017 Tax Act, individuals are no longer entitled to deduct casualty and theft loss expenses as itemized deductions (when those losses are not related to property used in a trade or business). An exception exists for losses that occur in federally declared disaster areas. However, if a taxpayer has personal casualty gains, the new rules do not apply (even if the loss does not occur in a federal disaster area) so long as the losses do not exceed the gains. This essentially means that casualty losses will continue to offset casualty gains. This provision applies for tax years beginning after December 31, 2017, and before January 1, 2026. The rules outlined below generally apply for tax years beginning before 2018 and for losses that are sustained in a disaster area.
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William H. Byrnes
William Byrnes, Esq., LL.M., CWM, is an executive professor and associate dean of special projects at the Texas A&M University School of Law. A pioneer of online legal education, he also is the author or co-author of 20 tax books and legal treatises. Byrnes is also the co-author of Tax Facts, a reference solution that helps to answer critical tax questions and provides the latest tax developments.
Robert Bloink
Robert Bloink, Esq., LL.M., has taught at the Texas A&M University School of Law and the Thomas Jefferson School of Law; in the past decade, Bloink has initiated $2B+ in insurance & alternative asset class portfolios, and previously served as a senior attorney in the IRS Office of Chief Counsel for the Large- and Mid-Sized Business Division. Bloink is also the co-author of Tax Facts, a reference solution that helps to answer critical tax questions and provides the latest tax developments.
