Article Date:
March 2021


Word Count:
2840

 

 

Deducting Disaster Losses for Individuals


We seem to be living in an age of natural disasters.

 

Uninsured losses to personal non-business property such as your home, personal belongings, or personal car due to a disaster can be deductible. But the rules are complex and not as generous as they used to be.

 

Only Casualty Losses Are Deductible

 

Damage to personal property caused by a disaster is deductible only if it qualifies as a casualty loss.1 A casualty loss is permanent damage, destruction, or loss of property due to an identifiable event that is sudden, unexpected, or unusual.

 

Deductible casualty losses include but are not limited to2

 

·

earthquakes;

·

fires;

·

floods;

·

car accidents caused by disasters (not by driver negligence);

·

government-ordered demolition or relocation of a building that is unsafe to use because of a disaster;

·

landslides;

·

oil spills;

·

sonic booms;

·

storms, including hurricanes and tornadoes;

·

terrorist attacks;

·

theft;

·

vandalism; and

·

volcanic eruptions.

 

Losses due to slow, progressive deterioration of property are not deductible as a casualty loss.3 For example, the steady weakening or deterioration of a home’s roof due to normal wind and weather conditions is not a deductible casualty loss. But the sudden destruction of a roof due to a tornado is a casualty loss.

 

For the loss to be deductible, there must be physical damage to property, not merely a decrease in value.4 Nor is lost revenue a deductible personal casualty loss. Thus, the COVD-19 pandemic has not resulted in deductible personal casualty losses because it did not cause physical damage to property—only to human beings.

 

Deductible Casualty Losses Come from Federally Declared Disasters

 

In the past, all types of casualty losses were deductible. But the Tax Cuts and Jobs Act radically changed the rules for 2018 through 2025. During these years, casualty losses to personal property such as your home, personal belongings, or car are deductible ... Log in to view full article.

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