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Replacement Period: Disaster and Theft Tax Relief (2025 IRS Guide)

This guide covers “Replacement Period” 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

Don’t report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed or stolen property. Your basis in the new property is generally the same as your adjusted basis in the property it replaces.

You must ordinarily report the gain on your stolen or destroyed property if you receive money or unlike property as reimbursement. However, you can choose to postpone reporting the gain if you purchase property that is similar or related in service or use to the stolen or destroyed property within a specified replacement period, discussed later. You can also choose to postpone reporting the gain if you purchase a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the property. See Controlling interest in a corporation, later.

If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property.

To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement.

Replacement Period

To postpone reporting your gain, you must buy replacement property within a specified period of time. This is the replacement period.

The replacement period begins on the date your property was damaged, destroyed, or stolen.

The replacement period generally ends 2 years after the close of the first tax year in which any part of your gain is realized.

Example.

You are a calendar year taxpayer. While you were on vacation, a valuable piece of antique furniture that cost $2,200 was stolen from your home. You discovered the theft when you returned home on July 7, 2025. Your insurance company investigated the theft and didn’t settle your claim until January 22, 2026, when they paid you $3,000. You first realized a gain from the reimbursement for the theft during 2026, so you have until December 31, 2028, to replace the property.

Main home in disaster area.

For your main home (or its contents) located in a federally declared disaster area, the replacement period generally ends 4 years after the close of the first tax year in which any part of your gain is realized. See Disaster Area Losses, later.

Example.

You are a calendar year taxpayer. A hurricane destroyed your home in September 2025. In December 2025, the insurance company paid you $3,000 more than the adjusted basis of your home. The area in which your home is located isn’t a federally declared disaster area. You first realized a gain from the reimbursement for the casualty in 2025, so you have until December 31, 2027, to replace the property. If your home had been in a federally declared disaster area, you would have until December 31, 2029, to replace the property.

Caution:

The replacement period may vary for other events. For information on the replacement period following a condemnation of property, see Involuntary Conversions in chapter 1 of Pub. 544. For information on the replacement period following the weather-related sale or exchange of livestock, see chapter 11 of Pub. 225.

Extension.

You can request an extension of the replacement period. You should request the extension before the end of the replacement period. Ordinarily, requests for extensions aren’t made or granted until near the end of the replacement period or the extended replacement period.

About the extension.

Extensions are usually limited to a period of not more than 1 year. The high market value or scarcity of replacement property isn’t sufficient grounds for granting an extension. If your replacement property is being constructed and you clearly show that the construction can’t be completed within the replacement period, you may be granted an extension of the period.

Making your request.

You can request an extension of the replacement period by faxing your written request to 877-477-9193 or mailing your request to Internal Revenue Service, 985 Michigan Ave., Stop 16, Detroit, MI 48226. The submission should include a cover sheet with the following information.

  • Date.

  • Your name, title, phone number, and address.

  • Attention: SB/SE Field Examination Area Director [Your State].

  • Subject: 1033 Extension Request for Replacement Period of Involuntarily Converted Property.

  • Number of pages faxed (inclusive of cover sheet).

What to include in your request.

Your request must contain all the details describing why you need the extension. Include:

  1. The name, address, and taxpayer identification number of the taxpayer,

  2. A detailed description of the property converted,

  3. Date the property was converted,

  4. Adjusted basis of the property converted,

  5. Date(s) and amount(s) of the payments received,

  6. Copy of the return with the involuntary conversion of property at a gain and related deferral of the gain, and

  7. A description of the actions taken to replace the property.

Filing after the replacement period.

You can file a request within a reasonable time after the replacement period ends if you can show a good reason for the delay. An extension may be granted if you can show that there is a reasonable cause for not making the replacement within the replacement period.

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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