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Special Procedure—Safe Harbor Methods for Determining Casualty and Theft Losses: Disaster and Theft Tax Relief (2025 IRS Guide)

This guide covers “Special Procedure—Safe Harbor Methods for Determining Casualty and Theft Losses” 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

FMV is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts.

The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property’s FMV immediately before and immediately after the casualty or theft.

Special Procedure—Safe Harbor Methods for Determining Casualty and Theft Losses

To figure the amount of your casualty and theft losses, you must generally determine the actual reduction in the FMV of lost or damaged property using a competent appraisal or the cost of repairs you actually make. But the special safe harbor methods in Revenue Procedure 2018-08, 2018-2 I.R.B. 286, allow you to determine the decrease in FMV in other ways.

Caution:

If you are an individual, casualty losses of personal-use property are deductible only if the loss is attributable to a federally declared disaster. An exception to the rule limiting the deduction for personal casualty and theft losses applies if you have personal casualty gains. In this case, you may deduct personal casualty losses that aren’t attributable to a federally declared disaster to the extent they don’t exceed your personal casualty gains.

Special procedure for determining casualty and theft losses generally.

Revenue Procedure 2018-08, 2018-2 I.R.B. 286, available at IRS.gov/irb/2018-02_IRB#RP-2018-08, provides safe harbor methods that you may use to figure the amount of your casualty and theft losses of your personal-use residential real property and personal belongings. If you qualify for and use a safe harbor method described in Revenue Procedure 2018-08, the IRS won’t challenge your determination. The use of a safe harbor method described in Revenue Procedure 2018-08 isn’t mandatory.

Personal-use residential real property safe harbor methods.

Personal-use residential real property is generally real property, including improvements, that is owned by the individual who suffered a casualty loss and that contains at least one personal residence. It doesn’t include a personal residence if any part of the personal residence is used as rental property or contains a home office used in a trade or business or transaction entered into for profit. For more details, see Revenue Procedure 2018-08.

The safe harbor methods for personal-use residential real property available through Revenue Procedure 2018-08 are the following.

  • Estimated repair cost method.

  • De minimis method.

  • Insurance method.

  • Federally declared disaster method—contractor safe harbor.

  • Federally declared disaster method—disaster loan appraisal.

Estimated repair cost method.

The estimated repair cost safe harbor method allows you to figure the decrease in the FMV of your personal-use residential real property using the lesser of two repair estimates prepared by separate and independent licensed contractors. The estimates must detail the itemized costs to restore your property to its condition immediately before the casualty. The estimated repair cost safe harbor method is limited to casualty losses of $20,000 or less.

De minimis method.

The de minimis safe harbor method allows you to figure the decrease in the FMV of your personal-use residential real property based on a written good-faith estimate of the cost of repairs required to restore your property to its condition immediately before the casualty. You must keep documentation showing how you estimated the amount of your loss. The de minimis safe harbor method is available for casualty losses of $5,000 or less.

Insurance method.

The insurance safe harbor method allows you to figure the decrease in the FMV of your personal-use residential real property based upon the estimated loss in reports prepared by your homeowners or flood insurance company. These reports must set forth the estimated loss you sustained from the damage to or the destruction of your property.

Federally declared disaster method—contractor safe harbor.

If the loss occurred in a disaster area and was due to a federally declared disaster, then you may use the contractor safe harbor method or the disaster loan appraisal method. Under the contractor safe harbor method, you may use the contract price for the repairs specified in a contract prepared by an independent and licensed contractor to determine the decrease in the FMV of your personal-use residential real property. This safe harbor method doesn’t apply unless you are subject to a binding contract signed by you and the contractor setting forth the itemized costs to restore your personal-use residential real property to its condition immediately before the casualty.

Federally declared disaster method—disaster loan appraisal.

Under the disaster loan appraisal safe harbor method, you may use an appraisal prepared to obtain a loan of federal funds or a loan guarantee from the federal government that identifies your estimated loss from a federally declared disaster to determine the decrease in the FMV of your personal-use residential real property.

Personal belongings safe harbor methods.

Personal belongings generally include items of tangible personal property owned by an individual who suffered a casualty or theft loss if they aren’t used in a trade or business. Personal belongings don’t include an item that maintains or increases its value over time or certain other types of property. For more details, see Revenue Procedure 2018-08. The safe harbor methods for personal belongings are the de minimis method and the replacement cost safe harbor method for federally declared disasters.

De minimis method.

Under the de minimis method, you can make a good-faith estimate of the decrease in the FMV of your personal belongings. You must maintain records describing your affected personal belongings as well as your methodology for estimating your loss. This method is limited to losses of $5,000 or less.

Replacement cost safe harbor method for federally declared disasters.

The replacement cost safe harbor method for federally declared disasters allows you to determine the FMV of your personal belongings located in a disaster area immediately before a federally declared disaster to figure the amount of your casualty or theft loss. To use the replacement cost safe harbor method, you must first determine the current cost to replace your personal belonging with a new one and then reduce that amount by 10% for each year you have owned the personal belonging. See the Personal Belongings Valuation Table in Revenue Procedure 2018-08. If you choose to use the replacement cost safe harbor method, then you must use that method for all your personal belongings, with certain exceptions identified in Revenue Procedure 2018-08.

Each of these safe harbor methods is subject to additional rules and exceptions. For additional information, see Revenue Procedure 2018-08.

Decreases to safe harbor loss amount.

The loss determined through the safe harbor methods must be reduced by the value of any repairs provided by a third party at no cost (for example, work done by volunteers or via donations) to you. Additionally, reduce your loss by the amount of any insurance, reimbursements, or other compensation received.

Reporting requirements on Form 4684.

Attach a statement to Form 4684 stating that you used Revenue Procedure 2018-08 to determine the amount of your casualty loss. Include the specific safe harbor method used. When completing Form 4684, don’t enter an amount on line 5 or line 6 for each property. Instead, enter the decrease in the FMV determined under the relevant safe harbor method on line 7.

Tip:

For losses due to Hurricane Harvey, Hurricane Irma, and Hurricane Maria, see Revenue Procedure 2018-09, 2018-2 I.R.B. 290, available at IRS.gov/irb/2018-02_IRB#RP-2018-09, for the cost indexes safe harbor method.

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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