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Figuring the Deduction: Disaster and Theft Tax Relief (2025 IRS Guide)

This guide covers “Figuring the Deduction” within disaster and theft tax relief. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 547 (2025), Casualties, Disasters, and Thefts, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

After you have figured the amount of your casualty or theft loss, you must figure how much of the loss you can deduct.

The deduction for casualty and theft losses of personal-use property is limited. For tax years beginning after 2017, personal casualty and theft losses of an individual are deductible only to the extent they’re attributable to a federally declared disaster. Personal casualty and theft losses attributable to a federally declared disaster are subject to the $100 per casualty and 10% rules, discussed later. The $100 and 10% rules are also summarized in Table 2.

An exception to the rule above limiting the personal casualty and theft loss deduction to losses attributable to a federally declared disaster applies if you have personal casualty gains for the tax year. In this case, you may reduce your personal casualty gains by any casualty losses not attributable to a federally declared disaster. Any excess gain is used to reduce losses from a federally declared disaster. The 10% rule is applied to any federal disaster losses that remain.

Losses on business property and income-producing property aren’t subject to these rules. However, if your casualty or theft loss involved a home you used for business or rented out, your deductible loss may be limited. See the instructions for Form 4684, Section B. If the casualty or theft loss involved property used in a passive activity, see Form 8582, Passive Activity Loss Limitations, and its instructions.

Figuring the Deduction

Generally, you must figure your loss separately for each item stolen, damaged, or destroyed. However, a special rule applies to real property you own for personal use.

Real property.

In figuring a loss to real estate you own for personal use, all improvements (such as buildings and ornamental trees and the land containing the improvements) are considered together.

Example 1.

In June, a tornado destroyed your lakeside cottage, which cost $144,800 (including $14,500 for the land) several years ago. (Your land wasn’t damaged.) This was your only casualty or theft loss for the year. The FMV of the property immediately before the tornado was $180,000 ($145,000 for the cottage and $35,000 for the land). The FMV immediately after the tornado was $35,000 (value of the land). You collected $130,000 from the insurance company. Your AGI for the year the tornado occurred is $80,000. Your deduction for the casualty loss is $6,700, figured in the following manner.

1. Adjusted basis of the entire property (cost in this example) $144,800
2. FMV of entire property before tornado $180,000
3. FMV of entire property after tornado 35,000
4. Decrease in FMV of entire property
(line 2 − line 3)		 $145,000
5. Loss (smaller of line 1 or line 4) $144,800
6. Subtract insurance 130,000
7. Loss after reimbursement $14,800
8. Subtract $100 100
9. Loss after $100 rule $14,700
10. Subtract 10% of $80,000 AGI 8,000
11. Casualty loss deduction $ 6,700

Example 2.

You bought your home a few years ago. You paid $150,000 ($10,000 for the land and $140,000 for the house). You also spent an additional $2,000 for landscaping. This year a hurricane destroyed your home. The hurricane also damaged the shrubbery and trees in your yard. The hurricane was your only casualty or theft loss this year. Competent appraisers valued the property as a whole at $175,000 before the hurricane but only $50,000 after the hurricane. Shortly after the hurricane, the insurance company paid you $95,000 for the loss. Your AGI for this year is $70,000. You figure your casualty loss deduction as follows.

1. Adjusted basis of the entire property (cost of land, building, and landscaping) $152,000
2. FMV of entire property before hurricane $175,000
3. FMV of entire property after hurricane 50,000
4. Decrease in FMV of entire property
(line 2 − line 3)		 $125,000
5. Loss (smaller of line 1 or line 4) $125,000
6. Subtract insurance 95,000
7. Loss after reimbursement $30,000
8. Subtract $100 100
9. Loss after $100 rule $29,900
10. Subtract 10% of $70,000 AGI 7,000
11. Casualty loss deduction $ 22,900

Personal property.

Personal property is any property that isn’t real property. If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. Then combine these separate losses to figure the total loss. Reduce the total loss by $100 and 10% of your AGI to figure the loss deduction.

Example 1.

In August, a storm that was determined to be a federally declared disaster destroyed your pleasure boat, which cost $18,500. This was your only casualty or theft loss for the year. Its FMV immediately before the storm was $17,000. You had no insurance but were able to salvage the motor of the boat and sell it for $200. Your AGI for the year the casualty occurred is $70,000.

Although the motor was sold separately, it is part of the boat and not a separate item of property. You figure your casualty loss deduction as follows.

1. Adjusted basis (cost in this example) $18,500
2. FMV before storm $17,000
3. FMV after storm 200
4. Decrease in FMV (line 2 − line 3) $16,800
5. Loss (smaller of line 1 or line 4) $16,800
6. Subtract insurance -0-
7. Loss after reimbursement $16,800
8. Subtract $100 100
9. Loss after $100 rule $16,700
10. Subtract 10% of $70,000 AGI 7,000
11. Casualty loss deduction $ 9,700

Example 2.

In June, you were involved in an auto accident that totally destroyed your personal car and your antique pocket watch. You had bought the car for $30,000. The FMV of the car just before the accident was $17,500. Its FMV just after the accident was $180 (scrap value). Your insurance company reimbursed you $16,000.

Your watch wasn’t insured. You had purchased it for $250. Its FMV just before the accident was $500. In the same year, you also had a $2,000 casualty gain and a separate $5,000 casualty loss attributable to a federally declared disaster. Your AGI for the year is $97,000. Your casualty loss deduction is zero, figured as follows.

Car Watch
1. Adjusted basis (cost) $30,000 $250
2. FMV before accident $17,500 $500
3. FMV after accident 180 -0-
4. Decrease in FMV (line 2 − line 3) $17,320 $500
5. Loss (smaller of line 1 or line 4) $17,320 $250
6. Subtract insurance 16,000 -0-
7. Loss after reimbursement $1,320 $250
8. Total loss $1,570
9. Subtract $100 100
10. Loss not attributable to a federally declared disaster after $100 rule $1,470
11. Casualty gain $2,000
12. Casualty loss not attributable to a federally declared disaster 1,470
13. Remaining gain after offsetting the loss not attributable to a federally declared disaster
(line 11 − line 12; if zero or less, enter -0-)		 $530
14. Casualty loss attributable to a federally declared disaster $5,000
15. Subtract $100 100
16. Loss after $100 rule $4,900
17. Subtract remaining gain (line 13) 530
18. Loss after subtracting gain $4,370
19. Subtract 10% of $97,000 AGI 9,700
20. Casualty loss deduction attributable to a federally declared disaster $ -0-

Both real and personal properties.

When a casualty involves both real and personal properties, you must figure the loss separately for each type of property. However, you apply a single $100 reduction to the total loss. Then you apply the 10% rule to figure the casualty loss deduction.

Example.

In July, a hurricane, which was a federally declared disaster, damaged your home, which cost you $164,000 including land. The FMV of the property (both building and land) immediately before the storm was $170,000 and its FMV immediately after the storm was $100,000. Your household furnishings were also damaged. You separately figured the loss on each damaged household item and arrived at a total loss of $600.

You collected $50,000 from the insurance company for the damage to your home, but your household furnishings weren’t insured. Your AGI for the year the hurricane occurred is $65,000. You figure your casualty loss deduction from the hurricane in the following manner.

1. Adjusted basis of real property (cost in this example) $164,000
2. FMV of real property before hurricane $170,000
3. FMV of real property after hurricane 100,000
4. Decrease in FMV of real property
(line 2 − line 3)		 $70,000
5. Loss on real property (smaller of line 1 or line 4) $70,000
6. Subtract insurance 50,000
7. Loss on real property after reimbursement $20,000
8. Loss on furnishings $600
9. Subtract insurance -0-
10. Loss on furnishings after reimbursement $600
11. Total loss (line 7 plus line 10) $20,600
12. Subtract $100 100
13. Loss after $100 rule $20,500
14. Subtract 10% of $65,000 AGI 6,500
15. Casualty loss deduction $14,000

Property used partly for business and partly for personal purposes.

When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use portion and for the business or income-producing portion. You must figure each loss separately because the losses attributed to these two uses are figured in two different ways. When figuring each loss, allocate the total cost or basis, the FMV before and after the casualty or theft loss, and the insurance or other reimbursement between the business and personal use of the property. The $100 rule and the 10% rule apply only to the casualty or theft loss on the personal-use portion of the property.

Example.

You own a building that you constructed on leased land. You use half of the building for your business and you live in the other half. The cost of the building was $400,000. You made no further improvements or additions to it.

In March, a flood that was determined to be a federally declared disaster damaged the entire building. The FMV of the building was $380,000 immediately before the flood and $320,000 afterwards. Your insurance company reimbursed you $40,000 for the flood damage. Depreciation on the business part of the building before the flood totaled $24,000. Your adjusted gross income for the year the flood occurred is $125,000.

You have a deductible business casualty loss of $10,000. You don’t have a deductible personal casualty loss because of the 10% rule. You figure your loss as follows.

Business Part Personal Part
1. Cost (total $400,000) $200,000 $200,000
2. Subtract depreciation 24,000 -0-
3. Adjusted basis $176,000 $200,000
4. FMV before flood (total $380,000) $190,000 $190,000
5. FMV after flood (total $320,000) 160,000 160,000
6. Decrease in FMV
(line 4 − line 5)		 $30,000 $30,000
7. Loss (smaller of line 3 or line 6) $30,000 $30,000
8. Subtract insurance 20,000 20,000
9. Loss after reimbursement $10,000 $10,000
10. Subtract $100 on personal-use property -0- 100
11. Loss after $100 rule $10,000 $9,900
12. Subtract 10% of $125,000 AGI on personal-use property -0- 12,500
13. Deductible business loss $10,000
14. Deductible personal loss $ -0-

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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