Types of Reimbursements: Disaster and Theft Tax Relief (2025 IRS Guide)
This guide covers “Types of Reimbursements” 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
If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. You don’t have a casualty or theft loss to the extent you are reimbursed.
If in the year of the casualty there is a claim for reimbursement with a reasonable prospect of recovery, the loss isn’t sustained until you know with reasonable certainty whether such reimbursement will be received. If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. You must reduce your loss even if you don’t receive payment until a later tax year. See Reimbursement Received After Deducting Loss, later.
Types of Reimbursements
The most common type of reimbursement is an insurance payment for your stolen or damaged property. Other types of reimbursements are discussed next. Also see the Instructions for Form 4684.
Employer’s emergency disaster fund.
If you receive money from your employer’s emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. Take into consideration only the amount you used to replace your destroyed or damaged property.
Example.
Your home was extensively damaged by a tornado. Your loss after reimbursement from your insurance company was $10,000. Your employer set up a disaster relief fund for its employees. Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. You received $4,000 from the fund and spent the entire amount on repairs to your home. In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer’s fund. Your casualty loss before applying the deduction limits (discussed later) is $6,000.
Cash gifts.
If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you don’t reduce your casualty loss by these excludable cash gifts. This applies even if you use the money to pay for repairs to property damaged in the disaster.
Example.
Your home was damaged by a hurricane. Relatives and neighbors made cash gifts to you that were excludable from your income. You used part of the cash gifts to pay for repairs to your home. There were no limits or restrictions on how you could use the cash gifts. It was an excludable gift, so the money you received and used to pay for repairs to your home doesn’t reduce your casualty loss on the damaged home.
Insurance payments for living expenses.
You don’t reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations.
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You lose the use of your main home because of a casualty.
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Government authorities don’t allow you access to your main home because of a casualty or threat of one.
Inclusion in income.
If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Report this amount on Schedule 1 (Form 1040), line 8z. However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. See Qualified disaster relief payments, later, under Disaster Area Losses.
A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you couldn’t use your home and your normal living expenses for that period. Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. Generally, these expenses include the amounts you pay for the following.
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Renting suitable housing.
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Transportation.
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Food.
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Utilities.
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Miscellaneous services.
Example.
As a result of a hurricane, you vacated your apartment for a month and moved to a motel. You normally pay $1,400 a month for rent. None was charged for the month the apartment was vacated. Your motel rent for this month was $3,000. You normally pay $500 a month for food. Your food expenses for the month you lived in the motel were $850. You received $2,200 from your insurance company to cover your living expenses. You determine the payment you must include in income as follows.
| 1. | Insurance payment for living expenses | $2,200 | |
| 2. | Actual expenses during the month you are unable to use your home because of the hurricane | $3,850 | |
| 3. | Normal living expenses | 1,900 | |
| 4. | Temporary increase in living expenses: Subtract line 3 from line 2 | 1,950 | |
| 5. | Amount of payment includible in income: Subtract line 4 from line 1 | $ 250 | |
Tax year of inclusion.
You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment.
Example.
Your main home was destroyed by a tornado in June 2023. You regained use of your home in November 2024. The insurance payments you received in 2023 and 2024 were $1,500 more than the temporary increase in your living expenses during those years. You include this amount in income on your 2024 Form 1040. If, in 2025, you receive further payments to cover the living expenses you had in 2023 and 2024, you must include those payments in income on your 2025 Form 1040 or 1040-SR.
Disaster relief.
Food, medical supplies, and other forms of assistance you receive don’t reduce your casualty loss unless they are replacements for lost or destroyed property.
Table 2. Deduction Limit Rules for Personal-Use Property
| $100 rule | 10% rule | ||||
| General Application | You must reduce each casualty or theft loss by $100 when figuring your deduction. Apply this rule to personal-use property after you have figured the amount of your loss.1 | You must reduce your total casualty or theft loss attributable to a federally declared disaster by 10% of your AGI. Apply this rule to personal-use property after you reduce each loss by $100 (the $100 rule).2 | |||
| Single Event | Apply this rule only once, even if many pieces of property are affected. | Apply this rule only once, even if many pieces of property are affected. | |||
| More Than One Event | Apply to the loss from each event. | Apply to the total of all your losses from all federally declared disasters. | |||
| More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) | Apply separately to each person. | Apply separately to each person. | |||
| Married Couple— With Loss From the Same Event | Filing Joint Return | Apply as if you were one person. | Apply as if you were one person. | ||
| Filing Separate Return | Apply separately to each spouse. | Apply separately to each spouse. | |||
| More Than One Owner (other than a married couple filing jointly) | Apply separately to each owner of jointly owned property. | Apply separately to each owner of jointly owned property. | |||
| 1 Qualified disaster losses must be reduced by $500 when figuring your deduction. See Disaster Area Losses, later, for more information. | |||||
| 2 The 10% rule doesn’t apply to qualified disaster losses. See Disaster Area Losses, later, for more information. | |||||
Tip:
Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster aren’t taxable income to you. For more information, see Qualified disaster relief payments under Disaster Area Losses, later.
Disaster unemployment assistance payments are unemployment benefits that are taxable.
Generally, disaster relief grants received under the Stafford Act aren’t included in your income. See Federal disaster relief grants, later, under Disaster Area Losses.
Loan proceeds.
Don’t reduce your casualty loss by loan proceeds you use to rehabilitate or replace property on which you are claiming a casualty loss deduction. If you have a federal loan that is canceled (forgiven), see Federal loan canceled, later, under Disaster Area Losses.
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
- Publication 547 (2025), Casualties, Disasters, and Thefts: Figuring a Loss — Insurance and Other Reimbursements — Types of Reimbursements — Internal Revenue Service; 2025 edition.
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.