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           Publication 547
           Cat. No. 15090K                                                     Contents
                                                                               Future Developments           . . . . . . . . . . . . 1
Department 
of the     Casualties,                                                         Reminders . . . . . . . . . . . . . . . . . . . 1
Treasury
Internal                                                                       Introduction . . . . . . . . . . . . . . . . . . 2
Revenue    Disasters, and 
Service                                                                        Casualty      . . . . . . . . . . . . . . . . . . . . 2
           Thefts                                                              Theft. . . . . . . . . . . . . . . . . . . . . . . 4
                                                                               Loss on Deposits . . . . . . . . . . . . . . . 5
                                                                               Proof of Loss       . . . . . . . . . . . . . . . . . 5
           For use in preparing
                                                                               Figuring a Loss . . . . . . . . . . . . . . . . 5
           2022 Returns                                                        Deduction Limits . . . . . . . . . . . . . . . 9

                                                                               Figuring a Gain       . . . . . . . . . . . . . . .   12
                                                                               When To Report Gains and Losses . . .                 15
                                                                               Disaster Area Losses          . . . . . . . . . . .   15
                                                                               How To Report Gains and Losses              . . . .   18
                                                                               How To Get Tax Help           . . . . . . . . . . .   19
                                                                               Index       . . . . . . . . . . . . . . . . . . . . . 21

                                                                               Future Developments
                                                                               For  the  latest  information  about  developments 
                                                                               related to Pub. 547, such as legislation enacted 
                                                                               after it was published, go to IRS.gov/Pub547.

                                                                               Reminders
                                                                               Special rules and return procedures expan-
                                                                               ded  for  claiming  qualified  disaster-related 
                                                                               personal casualty losses.           The Taxpayer Cer-
                                                                               tainty and Disaster Tax Relief Act of 2019 and 
                                                                               the Taxpayer Certainty and Disaster Tax Relief 
                                                                               Act of 2020 expanded the special rules and re-
                                                                               turn procedures for personal casualty losses at-
                                                                               tributable to certain major federal disasters that 
                                                                               were declared in 2018, 2019, and 2020.
                                                                               Qualified disaster losses in those tax years 
                                                                               may  be  claimed  on  Form  4684.  See          Qualified 
                                                                               disaster loss, later, for more information.
                                                                                           You  may  have  to  file  an  amended  re-
                                                                               TIP         turn  on  Form  1040-X  to  claim  these 
                                                                                           benefits  on  your  2018,  2019,  and/or 
                                                                               2020  returns.  Form  1040-X  is  available  at 
                                                                               IRS.gov/Form1040X.  Prior  revisions  of  Form 
                                                                               4684  are  available  at      IRS.gov/Form4684.  See 
                                                                               How to report the loss on Form 1040-X, later.
                                                                               Limitation  on  personal  casualty  and  theft 
                                                                               losses.     Personal  casualty  and  theft  losses  of 
                                                                               an individual, sustained in a tax year beginning 
                                                                               after 2017, are deductible only to the extent that 
              Get forms and other information faster and easier at:            the  losses  are  attributable  to  a  federally  de-
              • IRS.gov (English)         • IRS.gov/Korean (한국어)               clared disaster.
              • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский)          Personal casualty and theft losses attributa-
              • IRS.gov/Chinese (中文)      • IRS.gov/Vietnamese (Tiếng Việt)    ble to a federally declared disaster are subject 
                                                                               to  the  $100  per  casualty  and  10%  of  your 

Mar 2, 2023

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adjusted gross income (AGI) reductions unless deposits occurs when your financial institution Ordering tax forms, instructions, and
they are attributable to a qualified disaster loss. becomes insolvent or bankrupt. publications. Go to IRS.gov/OrderForms to
Personal casualty and theft losses attributa- This publication discusses the following top- order current forms, instructions, and publica-
ble to a qualified disaster loss are not subject to ics. tions; call 800-829-3676 to order prior-year
the 10% of the AGI reduction and the $100 re- • Definitions of a casualty, theft, and loss on forms and instructions. The IRS will process
duction is increased to $500. deposits. your order for forms and publications as soon
An exception to the rule above, limiting the • How to figure the amount of your gain or as possible. Don’t resubmit requests you’ve al-
personal casualty and theft loss deduction to loss. ready sent us. You can get forms and publica-
losses attributable to a federally declared disas- • How to treat insurance and other reim- tions faster online.
ter, applies if you have personal casualty gains bursements you receive.
for the tax year. For more information, see De- • The deduction limits. Useful Items
duction Limits, later. • When and how to report a casualty or theft. You may want to see:
• The special rules for disaster area losses.
Special rules for capital gains invested in
qualified opportunity funds (QOFs). If you Forms to file. Generally, when you have a Publication
have a capital gain for 2022, you can invest that casualty or theft, you have to file Form 4684. 523 523 Selling Your Home
gain into a QOF and elect to defer part or all of You may also have to file one or more of the fol- 525 525 Taxable and Nontaxable Income
the gain that you would otherwise include in in- lowing forms.
come until December 31, 2026. You may also • Schedule A (Form 1040). 536 536 Net Operating Losses (NOLs) for
be able to permanently exclude gain from the • Schedule A (Form 1040-NR) (for nonresi- Individuals, Estates, and Trusts
sale or exchange of an investment in a QOF if dent aliens). 550 550 Investment Income and Expenses
the investment is held for at least 10 years. For • Schedule D (Form 1040).
information about how to elect to use these spe- • Form 4797. 551 551 Basis of Assets
cial rules, see the Instructions for Form 8949, 584 584 Casualty, Disaster, and Theft Loss
Sales and Other Dispositions of Capital Assets. For details on which form to use, see How To
For additional information, see Opportunity Report Gains and Losses, later. Workbook (Personal-Use Property)
Zones Frequently Asked Questions on IRS.gov. 584-B 584-B Business Casualty, Disaster, and
Condemnations. For information on condem- Theft Loss Workbook
Deferral of gain invested in a QOF. If you nations of property, see Involuntary Conver-
realize a gain from an actual, or deemed, sale sions in chapter 1 of Pub. 544, Sales and Other Form (and Instructions)
or exchange with an unrelated person and dur- Dispositions of Assets.
Schedule A (Form 1040)
ing the 180-day period beginning on the date Schedule A (Form 1040) Itemized
realizing the gain, invested an amount of the Workbooks for casualties and thefts. Pub. Deductions
gain in a QOF, you may be able to elect to tem- 584, Casualty, Disaster, and Theft Loss Work- Schedule A (Form 1040-NR) Schedule A (Form 1040-NR) Itemized
porarily defer part or all of the gain that would book (Personal-Use Property), is available to Deductions (for nonresident aliens)
otherwise be included in income. If you make help you make a list of your stolen or damaged
the election, the gain is included in taxable in- personal-use property and figure your loss. It in- Schedule D (Form 1040) Schedule D (Form 1040) Capital Gains
come only to the extent, if any, that the amount cludes schedules to help you figure the loss on and Losses
of realized gain exceeds the aggregate amount your home and its contents, and your motor ve- 4684 4684 Casualties and Thefts
invested in a QOF during the 180 day period ‐ hicles. 4797 4797 Sales of Business Property
beginning on the date the gain was realized. Pub. 584-B, Business Casualty, Disaster,
and Theft Loss Workbook, is available to help See How To Get Tax Help near the end of this
How to report. Report the gain as it would you make a list of your stolen or damaged busi- publication for information about getting publi-
otherwise be reported if you were not making ness or income-producing property and figure cations and forms.
the election. Report the election for the amount your loss.
invested in a QOF on Form 8949. See the In-
structions for Form 8949 for information on how Comments and suggestions. We welcome Casualty
to make the election. You will need to attach your comments about this publication and sug-
Form 8997 annually until you dispose of the gestions for future editions. A casualty is the damage, destruction, or loss of
QOF investment. See the Form 8997 instruc- You can send us comments through property resulting from an identifiable event that
tions for more information. IRS.gov/FormComments. Or, you can write to is sudden, unexpected, or unusual.
QOF investment. If you held a qualified invest- the Internal Revenue Service, Tax Forms and • A sudden event is one that is swift, not
ment in a QOF at any time during the year, you Publications, 1111 Constitution Ave. NW, gradual or progressive.
must file your return with Form 8997 attached. IR-6526, Washington, DC 20224. • An unexpected event is one that is ordina-
See the Form 8997 instructions. Although we can’t respond individually to rily unanticipated and unintended.
each comment received, we do appreciate your • An unusual event is one that isn’t a
Photographs of missing children. The Inter- feedback and will consider your comments and day-to-day occurrence and that isn’t typical
nal Revenue Service is a proud partner with the suggestions as we revise our tax forms, instruc- of the activity in which you were engaged.
National Center for Missing & Exploited tions, and publications. Don’t send tax ques-
Children® (NCMEC). Photographs of missing tions, tax returns, or payments to the above ad- Casualty losses are deductible during the
children selected by the Center may appear in dress. tax year that the loss is sustained. This is gen-
this publication on pages that would otherwise erally the tax year that the loss occurred. How-
be blank. You can help bring these children Getting answers to your tax questions. ever, a casualty loss may be sustained in a year
home by looking at the photographs and calling If you have a tax question not answered by this after the casualty occurred. See When To Re-
1-800-THE-LOST (1-800-843-5678) if you rec- publication or the How To Get Tax Help section port Gains and Losses and Table 3, later.
ognize a child. at the end of this publication, go to the IRS In-
teractive Tax Assistant page at IRS.gov/ Definitions. Three specific types of casualty
Help/ITA where you can find topics by using the losses are described in this publication.
Introduction search feature or viewing the categories listed.
1. Federal casualty losses.
This publication explains the tax treatment of Getting tax forms, instructions, and pub- 2. Disaster losses.
casualties, thefts, and losses on deposits. A lications. Go to IRS.gov/Forms to download
casualty occurs when your property is damaged current and prior-year forms, instructions, and 3. Qualified disaster losses.
as a result of a disaster such as a storm, fire, publications.
car accident, or similar event. A theft occurs All three types of losses refer to federally de-
when someone steals your property. A loss on clared disasters, but the requirements for each
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loss vary. A federally declared disaster is a dis- See IRS.gov/DisasterTaxRelief for date-spe- • A car accident if your willful negligence or
aster determined by the President of the United cific declarations associated with these disas- willful act caused it. The same is true if the
States to warrant assistance by the federal gov- ters and for more information. willful act or willful negligence of someone
ernment under the Stafford Act. A federally de- acting for you caused the accident.
clared disaster includes (a) a major disaster Deductible losses. For tax years 2018 • Progressive deterioration (explained be-
declaration, or (b) an emergency declaration through 2025, if you are an individual, casualty low). However, see Special Procedure for
under the Stafford Act. losses of personal-use property are deductible Damage From Corrosive Drywall, later.
only if the loss is attributable to a federally de-
Federal casualty loss. A federal casualty clared disaster (federal casualty loss). If the Family pet. Loss of property due to dam-
loss is an individual’s casualty or theft loss of event causing you to suffer a personal casualty age by a family pet isn’t deductible as a casu-
personal-use property that is attributable to a loss (not attributed to a federally declared dis- alty loss unless the requirements discussed
federally declared disaster. The casualty loss aster) occurred before January 1, 2018, but the earlier under Casualty are met.
must occur in a state receiving a federal disas- casualty loss wasn’t sustained until January 1,
ter declaration. If you suffered a federal casu- 2018, or later, the casualty loss isn’t deductible. Example. Your antique oriental rug was
alty loss, you are eligible to claim a casualty See When To Report Gains and Losses, later, damaged by your new puppy before it was
loss deduction. If you suffered a casualty or for more information on when a casualty loss is housebroken. Because the damage wasn’t un-
theft loss of personal-use property that wasn’t sustained. expected and unusual, the loss isn’t deductible
attributable to a federally declared disaster, it as a casualty loss.
isn’t a federal casualty loss, and you may not Example. As a result of a storm, a tree fell Progressive deterioration. Loss of prop-
claim a casualty loss deduction unless the ex- on your house in December 2020, and you suf- erty due to progressive deterioration isn’t de-
ception applies. See the Caution under Deduc- fered $5,000 in damage. The President didn’t ductible as a casualty loss. This is because the
tible losses, later. declare the storm a federally declared disaster. damage results from a steadily operating cause
Disaster loss. A disaster loss is a loss that You filed a claim with your insurance company or a normal process, rather than from a sudden
is attributable to a federally declared disaster and reasonably expected the entire amount of event. The following are examples of damage
and that occurs in an area eligible for assis- the claim to be covered by your insurance com- due to progressive deterioration.
tance pursuant to the Presidential declaration. pany. In January 2022, your insurance com- • The steady weakening of a building due to
The disaster loss must occur in a county eligible pany paid you $3,000 and determined it didn’t normal wind and weather conditions.
for public or individual assistance (or both). Dis- owe you the remaining $2,000 from your claim. • The deterioration and damage to a water
aster losses aren’t limited to individual per- The $2,000 personal casualty loss is sustained heater that bursts. However, the rust and
sonal-use property and may be claimed for indi- in 2022 even though the storm occurred in water damage to rugs and drapes caused
vidual business or income-producing property 2020. Thus, the $2,000 isn’t a federal casualty by the bursting of a water heater does
and by corporations, S corporations, and part- loss and isn’t deductible as a casualty loss un- qualify as a casualty.
nerships. If you suffered a disaster loss, you are der the new limitations. • Most losses of property caused by
eligible to claim a casualty loss deduction and An exception to the rule limiting the de- droughts. To be deductible, a drought-rela-
ted loss must generally be incurred in a
to elect to claim the loss in the preceding tax ! duction for personal casualty and theft trade or business or in a transaction en-
year. See Disaster Area Losses, later. CAUTION losses to federal casualty losses ap-
Qualified disaster loss. A qualified disas- plies where you have personal casualty gains. tered into for profit.
ter loss also includes an individual's casualty In this case, you may deduct personal casualty • Termite or moth damage.
and theft loss of personal-use property that is losses that aren’t attributable to a federally de- • The damage or destruction of trees,
attributable to: clared disaster to the extent they don’t exceed shrubs, or other plants by a fungus, dis-
• A major disaster declared by the President your personal casualty gains. ease, insects, worms, or similar pests.
However, a sudden destruction due to an
under section 401 of the Stafford Act in Casualty losses can result from a number of unexpected or unusual infestation of bee-
2016; different causes, including the following. tles or other insects may result in a casu-
• Hurricane Harvey; • Car accidents (but see Nondeductible los- alty loss.
• Tropical Storm Harvey; ses next for exceptions).
• Hurricane Irma; • Earthquakes.
• Hurricane Maria; • Fires (but see Nondeductible losses next Special Procedure for
• The California wildfires in 2017 and Janu- for exceptions). Damage From Corrosive
ary 2018; • Floods. Drywall
• A major disaster that was declared by the • Government-ordered demolition or reloca-
President under section 401 of the Stafford tion of a home that is unsafe to use be- Because the personal casualty losses
Act and that occurred in 2018 and before cause of a disaster as discussed under ! claimed under this special procedure
December 21, 2019, and continued no Disaster Area Losses, later. CAUTION aren’t attributable to a federally de-
later than January 19, 2020 (except those • Mine cave-ins. clared disaster, they’re only deductible to the
attributable to the California wildfires in • Shipwrecks. extent such losses don’t exceed your personal
January 2018 that received prior relief); • Sonic booms. casualty gains.
and • Storms, including hurricanes and torna-
• A major disaster that was declared by the does. If you suffered property losses due to the ef-
President during the period between Janu- • Terrorist attacks. fects of certain imported drywall installed in
ary 1, 2020, and February 25, 2021. Also, • Vandalism. homes between 2001 and 2009, under a spe-
this disaster must have an incident period • Volcanic eruptions. cial procedure, you can deduct the amounts
that began on or after December 28, 2019,
and on or before December 27, 2020, and Nondeductible losses. A casualty loss isn’t you paid to repair damage to your home and
must have ended no later than January 26, deductible, even to the extent the loss doesn’t household appliances due to corrosive drywall.
2021. A qualified disaster does not include exceed your personal casualty gains, if the Under this procedure, you treat the amounts
those losses attributable to any major dis- damage or destruction is caused by the follow- paid for repairs as a casualty loss in the year of
aster which has been declared only by rea- ing. payment. For example, amounts you paid for
son of COVID-19. • Accidentally breaking articles such as repairs in 2022 are deductible on your 2022 tax
If you suffered a qualified disaster loss, you glassware or china under normal condi- return and amounts you paid for repairs in 2021
are eligible to claim a casualty loss deduction, tions. are deductible on your 2021 tax return.
to elect to claim the loss in the preceding tax • A family pet (explained below). Note. If you paid for any repairs before
year, and to deduct the loss without itemizing • A fire if you willfully set it, or pay someone 2022 and you choose to follow this special pro-
other deductions on Schedule A (Form 1040). else to set it. cedure, you can amend your return for the
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earlier year by filing Form 1040-X, Amended If you have a pending claim for reim- diamond necklace was stolen, resulting in a
U.S. Individual Income Tax Return, and attach- ! bursement (or you intend to pursue re- $15,500 casualty loss. Martin and Grace also
ing a completed Form 4684 for the appropriate CAUTION imbursement), you may have income lost their camper as a result of a lightning strike.
year. Form 4684 for the appropriate year can be or an additional deduction in a later tax year de- They have replacement-value insurance on the
found at IRS.gov. Generally, Form 1040-X must pending on the actual amount of reimbursement camper, so they have a $13,000 gain. Finally,
be filed within 3 years after the date the original received. See Reimbursement Received After they lost their car in a flood determined to be a
return was filed or within 2 years after the date Deducting Loss, later. federally declared disaster, resulting in a casu-
the tax was paid, whichever is later. alty loss of $25,000. Because Martin and Grace
Lines 10–18. Complete these lines accord- experienced a $13,000 personal casualty gain
Corrosive drywall. For purposes of this spe- ing to the Instructions for Form 4684. as a result of the replacement-value insurance,
cial procedure, “corrosive drywall” means dry- they can offset that gain with a portion of their
wall that is identified as problem drywall under Choosing not to follow this special proce- loss attributable to the stolen necklace and
the two-step identification method published by dure. If you choose not to follow this special claim the full federal casualty loss of $25,000
the Consumer Product Safety Commission procedure, you are subject to all of the provi- subject to the $100 and 10% of AGI reductions.
(CPSC) and the Department of Housing and Ur- sions that apply to the deductibility of casualty
ban Development (HUD) in their interim guid- losses, and you must complete lines 1–9 ac- Decline in market value of stock. You can’t
ance dated January 28, 2010, as revised by the cording to the Instructions for Form 4684. This deduct as a theft loss the decline in market
CPSC and HUD. The revised identification means, for example, that you must establish value of stock acquired on the open market for
guidance and remediation guidelines are avail- that the damage, destruction, or loss of property investment if the decline is caused by disclo-
able at CPSC.gov/en/Safety-Education/Safety- resulted from an identifiable event as defined sure of accounting fraud or other illegal miscon-
Education-Centers/Drywall-Information-Center. earlier under Casualty. Furthermore, you must duct by the officers or directors of the corpora-
have proof that shows the following. tion that issued the stock. However, you may be
Special instructions for completing Form • The loss is properly deductible in the tax able to deduct it as a capital loss on Schedule D
4684. If you choose to follow this special pro- year you claimed it and not in some other (Form 1040) if the stock is sold or exchanged or
cedure, complete Form 4684, Section A, ac- year. See When To Report Gains and Los- becomes completely worthless. For more infor-
cording to the instructions below. The IRS won’t ses, later. mation about stock sales, worthless stock, and
challenge your treatment of damage resulting • The amount of the claimed loss. See Proof capital losses, see chapter 4 of Pub. 550.
from corrosive drywall as a casualty loss if you of Loss, later.
determine and report the loss as explained be- • No claim for reimbursement of any portion Mislaid or lost property. The simple disap-
low. of the loss exists for which there is a rea- pearance of money or property isn’t a theft.
sonable prospect of recovery. See When However, an accidental loss or disappearance
Top margin of Form 4684. Enter “Reve- To Report Gains and Losses, later. of property can qualify as a casualty if it results
nue Procedure 2010-36.” from an identifiable event that is sudden, unex-
Line 1. Enter the information required by pected, or unusual. Sudden, unexpected, and
the line 1 instructions. Theft unusual events were defined earlier under
Casualty.
Line 2. Skip this line. A theft is the taking and removing of money or
Line 3. Enter the amount of insurance or property with the intent to deprive the owner of Example. A car door is accidentally slam-
other reimbursements you received (including it. The taking of property must be illegal under med on your hand, breaking the setting of your
through litigation). If none, enter -0-. the law of the state where it occurred and it diamond ring. The diamond falls from the ring
must have been done with criminal intent. You and is never found. The loss of the diamond is a
Lines 4–7. Skip these lines. don’t need to show a conviction for theft. casualty.
Line 8. Enter the amount you paid to repair Theft includes the taking of money or prop- Losses from Ponzi-type investment
the damage to your home and household appli- erty by the following means. schemes. The IRS has issued the following
ances due to corrosive drywall. Enter only the Blackmail. guidance to assist taxpayers who are victims of
amounts you paid to restore your home to the •
condition existing immediately before the dam- • Burglary. losses from Ponzi-type investment schemes.
age. Don’t enter any amounts you paid for im- • Embezzlement. • Revenue Ruling 2009-9, 2009-14 I.R.B.
provements or additions that increased the • Extortion. 735 (available at IRS.gov/irb/
value of your home above its pre-loss value. If • Kidnapping for ransom. 2009-14_IRB#RR-2009-9).
you replaced a household appliance instead of • Larceny. • Revenue Procedure 2009-20, 2009-14
repairing it, enter the lesser of: • Robbery. I.R.B. 749 (available at IRS.gov/irb/
2009-14_IRB#RP-2009-20).
• The current cost to replace the original ap- The taking of money or property through fraud • Revenue Procedure 2011-58, 2011-50
pliance, or or misrepresentation is theft if it is illegal under I.R.B. 849 (available at IRS.gov/irb/
• The basis of the original appliance (gener- state or local law. 2011-50_IRB#RP-2011-58).
ally its cost).
Theft loss deduction limited. For tax years If you qualify to use Revenue Procedure
Line 9. If line 8 is more than line 3, do one 2018 through 2025, if you are an individual, 2009-20, as modified by Revenue Procedure
of the following. casualty and theft losses of personal-use prop- 2011-58, and you choose to follow the proce-
1. If you have a pending claim for reimburse- erty are deductible only if the losses are attribut- dures in the guidance, first fill out Section C of
ment (or you intend to pursue reimburse- able to a federally declared disaster (federal Form 4684 to determine the amount to enter on
ment), enter 75% of the difference be- casualty loss). Section B, line 28. Skip lines 19 through 27, but
you must fill out Section B, lines 29 through 39,
tween lines 3 and 8. An exception to the rule limiting the de- as appropriate. Section C of Form 4684 repla-
2. If item (1) doesn’t apply to you, enter the ! duction for personal casualty and theft ces Appendix A in Revenue Procedure
full amount of the difference between lines CAUTION losses to federal casualty losses ap- 2009-20. You don’t need to complete Appendix
3 and 8. plies where you have personal casualty gains. A. For more information, see the above revenue
In this case, you may deduct personal casualty ruling and revenue procedures, and the Instruc-
If line 8 is less than or equal to line 3, you can’t losses that aren’t attributable to a federally de- tions for Form 4684.
claim a casualty loss deduction using this spe- clared disaster to the extent they don’t exceed If you choose not to use the procedures in
cial procedure. your personal casualty gains. Revenue Procedure 2009-20, as modified by
Revenue Procedure 2011-58, you may claim
Example. Martin and Grace experienced your theft loss by filling out Section B, lines 19
multiple personal casualties in 2022. Grace’s through 39, as appropriate.
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Table 1. Reporting Loss on Deposits 3. From the smaller of the amounts you de-
termined in (1) and (2), subtract any insur-
IF you choose to report the loss as a... THEN report it on... ance or other reimbursement you received
casualty loss (see Casualty loss limitation under Form 4684 and Schedule A (Form 1040). or expect to receive.
Loss on Deposits) For personal-use property, apply the deduction
nonbusiness bad debt Form 8949 and Schedule D (Form 1040). limits, discussed later, to determine the amount
of your deductible loss.
Note that the personal-use property limita- More information. For more information, see Gain from reimbursement. If your reim-
tion for tax years 2018 through 2025 does not Deposit in Insolvent or Bankrupt Financial Insti- bursement is more than your adjusted basis in
apply to losses on income-producing property, tution in Pub. 550. the property, you have a gain. This is true even
such as losses from Ponzi-type investment if the decrease in the FMV of the property is
schemes. Deducted loss recovered. If you recover an smaller than your adjusted basis. If you have a
amount you deducted as a loss in an earlier gain, you may have to pay tax on it, or you may
year, you may have to include the amount re- be able to postpone reporting the gain. See Fig-
Loss on Deposits covered in your income for the year of recovery. uring a Gain, later.
If any part of the original deduction didn’t re-
A loss on deposits can occur when a bank, duce your tax in the earlier year, you don’t have Business or income-producing property.
credit union, or other financial institution be- to include that part of the recovery in your in- If you have business or income-producing prop-
comes insolvent or bankrupt. If you incurred this come. For more information, see Recoveries in erty, such as rental property, and it is stolen or
type of loss, you can choose one of the follow- Pub. 525. completely destroyed, the decrease in FMV
ing ways to deduct the loss. isn’t considered. Your loss is figured as follows:
• As a casualty loss (to the extent the loss
doesn’t exceed your personal casualty Proof of Loss Your adjusted basis in the property
gains).
• As a nonbusiness bad debt. To deduct a casualty or theft loss, you must be MINUS
able to show that there was a casualty or theft. Any salvage value
You can no longer claim any miscella- You must also be able to support the amount
! neous itemized deductions, including you take as a deduction. MINUS
CAUTION the deduction for an ordinary loss on
Any insurance or other reimbursement
deposits in insolvent or bankrupt financial insti- Casualty loss proof. For a casualty loss, you you
tutions. should be able to show all of the following. receive or expect to receive
• That you were the owner of the property, or
Casualty loss. You can choose to deduct a if you leased the property from someone Loss of inventory. There are two ways
loss on deposits as a casualty loss for any year else, that you were contractually liable to you can deduct a casualty or theft loss of inven-
in which you can reasonably estimate how the owner for the damage. tory, including items you hold for sale to cus-
much of your deposits you have lost in an insol- • The type of casualty (car accident, fire, tomers.
vent or bankrupt financial institution. The choice storm, etc.) and when it occurred. One way is to deduct the loss through the in-
is generally made on the return you file for that • That the loss was a direct result of the crease in the cost of goods sold by properly re-
year and applies to all your losses on deposits casualty. porting your opening and closing inventories.
for the year in that particular financial institution. • Whether a claim for reimbursement exists Don’t claim this loss again as a casualty or theft
If you treat the loss as a casualty loss, you can’t for which there is a reasonable expectation loss. If you take the loss through the increase in
treat the same amount of the loss as a nonbusi- of recovery. the cost of goods sold, include any insurance or
ness bad debt when it actually becomes worth- other reimbursement you receive for the loss in
less. However, you can take a nonbusiness bad Theft loss proof. For a theft loss, you should
debt deduction for any amount of loss that is be able to show all of the following. gross income.
more than the estimated amount you deducted • That you were the owner of the property. The other way is to deduct the loss sepa-
as a casualty or ordinary loss. Once you make • That your property was stolen. rately. If you deduct it separately, eliminate the
the choice, you can’t change it without permis- • When you discovered your property was affected inventory items from the cost of goods
sion from the IRS. missing. sold by making a downward adjustment to
• Whether a claim for reimbursement exists opening inventory or purchases. Reduce the
Casualty loss limitation. If you are an in- for which there is a reasonable expectation loss by the reimbursement you received. Don’t
dividual, casualty losses of personal-use prop- of recovery. include the reimbursement in gross income. If
erty are deductible only if the loss is attributable you don’t receive the reimbursement by the end
to a federally declared disaster. An exception to It is important that you have records of the year, you may not claim a loss to the ex-
the rule limiting the deduction for personal that will prove your deduction. If you tent you have a reasonable prospect of recov-
casualty and theft losses to federal casualty los- RECORDS don’t have the actual records to sup- ery.
ses applies where you have personal casualty port your deduction, you can use other satisfac-
gains. Because a loss on deposits isn’t attribut- tory evidence to support it. Leased property. If you are liable for casu-
able to a federally declared disaster, you may alty damage to property you lease, your loss is
deduct losses on deposits as personal casualty the amount you must pay to repair the property
losses only to the extent they don’t exceed your minus any insurance or other reimbursement
personal casualty gains. Figuring a Loss you receive or expect to receive.
Nonbusiness bad debt. If you don’t choose to To determine your deduction for a casualty or Separate computations. Generally, if a single
claim the loss as a casualty loss for purposes of theft loss, you must first figure your loss. casualty or theft involves more than one item of
offsetting gains, you must wait until the year the property, you must figure the loss on each item
actual loss is determined and deduct the loss Amount of loss. Figure the amount of your separately. Then combine the losses to deter-
as a nonbusiness bad debt in that year. loss using the following steps. mine the total loss from that casualty or theft.
1. Determine your adjusted basis in the prop- Exception for personal-use real prop-
How to report. The kind of deduction you erty before the casualty or theft. erty. In figuring a casualty loss on per-
choose for your loss on deposits determines sonal-use real property, the entire property (in-
how you report your loss. See Table 1. 2. Determine the decrease in fair market
value (FMV) of the property as a result of cluding any improvements, such as buildings,
the casualty or theft.
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trees, and shrubs) is treated as one item. Figure Several factors are important in evaluating repairs you actually make. But the special safe
the loss using the smaller of the following. the accuracy of an appraisal, including the fol- harbor methods in Revenue Procedure
• The decrease in FMV of the entire prop- lowing. 2018-08, 2018-2 I.R.B. 286, allow you to deter-
erty. • The appraiser’s familiarity with your prop- mine the decrease in FMV in other ways.
• The adjusted basis of the entire property. erty before and after the casualty or theft.
See Real property under Figuring the De- • The appraiser’s knowledge of sales of If you are an individual, casualty losses
duction, later. comparable property in the area. ! of personal-use property are deducti-
• The appraiser’s knowledge of conditions in CAUTION ble only if the loss is attributable to a
the area of the casualty. federally declared disaster. An exception to the
Decrease in FMV • The appraiser’s method of appraisal. rule limiting the deduction for personal casualty
and theft losses applies if you have personal
You may be able to use an appraisal casualty gains. In this case, you may deduct
FMV is the price for which you could sell your TIP that you used to get a federal loan (or a personal casualty losses that aren’t attributable
property to a willing buyer when neither of you federal loan guarantee) as the result of to a federally declared disaster to the extent
has to sell or buy and both of you know all the a federally declared disaster to establish the they don’t exceed your personal casualty gains.
relevant facts. amount of your disaster loss. For more informa-
The decrease in FMV used to figure the tion on disasters, see Disaster Area Losses, Special procedure for determining casualty
amount of a casualty or theft loss is the differ- later. and theft losses generally. Revenue Proce-
ence between the property’s FMV immediately dure 2018-08, 2018-2 I.R.B. 286, available at
before and immediately after the casualty or Cost of cleaning up or making repairs. The IRS.gov/irb/2018-02_IRB#RP-2018-08, pro-
theft. cost of repairing damaged property isn’t part of vides safe harbor methods that you may use to
a casualty loss. Neither is the cost of cleaning figure the amount of your casualty and theft los-
FMV of stolen property. The FMV of property up after a casualty. But you can use the cost of ses of your personal-use residential real prop-
immediately after a theft is considered to be cleaning up or of making repairs after a casualty erty and personal belongings. If you qualify for
zero because you no longer have the property. as a measure of the decrease in FMV if you and use a safe harbor method described in
meet all the following conditions. Revenue Procedure 2018-08, the IRS won’t
Example. Several years ago, you pur- • The repairs are actually made. challenge your determination. The use of a safe
chased silver dollars at face value for $150. • The repairs are necessary to bring the harbor method described in Revenue Proce-
This is your adjusted basis in the property. Your property back to its condition before the dure 2018-08 isn’t mandatory.
silver dollars were stolen this year. The FMV of casualty.
the coins was $1,000 just before they were sto- • The amount spent for repairs isn’t exces- Personal-use residential real property safe
len, and insurance didn’t cover them. Your theft sive. harbor methods. Personal-use residential real
loss is $150. • The repairs take care of the damage only. property is generally real property, including im-
• The value of the property after the repairs provements, that is owned by the individual who
Recovered stolen property. Recovered sto- isn’t, due to the repairs, more than the suffered a casualty loss and that contains at
len property is your property that was stolen value of the property before the casualty. least one personal residence. It doesn’t include
and later returned to you. If you recovered prop- a personal residence if any part of the personal
erty after you had already taken a theft loss de- Landscaping. The cost of restoring land- residence is used as rental property or contains
duction, you must refigure your loss using the scaping to its original condition after a casualty a home office used in a trade or business or
smaller of the property’s adjusted basis (ex- may indicate the decrease in FMV. You may be transaction entered into for profit. For more de-
plained later) or the decrease in FMV from the able to measure your loss by what you spend tails, see Revenue Procedure 2018-08.
time just before it was stolen until the time it was on the following. The safe harbor methods for personal-use
recovered. Use this amount to refigure your to- • Removing destroyed or damaged trees residential real property available through Rev-
tal loss for the year in which the loss was de- and shrubs, minus any salvage you re- enue Procedure 2018-08 are the following.
ducted. ceive. • Estimated repair cost method.
If your refigured loss is less than the loss • Pruning and other measures taken to pre- • De minimis method.
you deducted, you generally have to report the serve damaged trees and shrubs. • Insurance method.
difference as income in the recovery year. But • Replanting necessary to restore the prop- • Federally declared disaster method—con-
report the difference only up to the amount of erty to its approximate value before the tractor safe harbor.
the loss that reduced your tax. For more infor- casualty. • Federally declared disaster method—dis-
mation on the amount to report, see Recoveries aster loan appraisal.
in Pub. 525. Car value. Books issued by various automo-
bile organizations that list the manufacturer and Estimated repair cost method. The esti-
the model of your car may be useful in figuring mated repair cost safe harbor method allows
Figuring Decrease in FMV—Items the value of your car. You can use the retail you to figure the decrease in the FMV of your
To Consider value for your car listed in the book and modify personal-use residential real property using the
it by such factors as mileage and the condition lesser of two repair estimates prepared by sep-
To figure the decrease in FMV because of a of your car to determine its value. The prices arate and independent licensed contractors.
casualty or theft, you generally need a compe- aren’t official, but they may be useful in deter- The estimates must detail the itemized costs to
tent appraisal. However, other measures can mining value and suggesting relative prices for restore your property to its condition immedi-
also be used to establish certain decreases. comparison with current sales and offerings in ately before the casualty. The estimated repair
See Appraisal Cost of cleaning up or making , your area. If your car isn’t listed in the books, cost safe harbor method is limited to casualty
repairs, and Special Procedure—Safe Harbor determine its value from other sources. A deal- losses of $20,000 or less.
Methods for Determining Casualty and Theft er’s offer for your car as a trade-in on a new car
Losses below. isn’t usually a measure of its true value. De minimis method. The de minimis safe
harbor method allows you to figure the de-
crease in the FMV of your personal-use resi-
Appraisal. An appraisal to determine the dif- Special Procedure—Safe Harbor dential real property based on a written
ference between the FMV of the property imme- Methods for Determining Casualty good-faith estimate of the cost of repairs re-
diately before a casualty or theft and immedi-
ately afterward should be made by a competent and Theft Losses quired to restore your property to its condition
appraiser. The appraiser must recognize the ef- immediately before the casualty. You must
fects of any general market decline that may oc- To figure the amount of your casualty and theft keep documentation showing how you estima-
cur along with the casualty. This information is losses, you must generally determine the actual ted the amount of your loss. The de minimis
needed to limit any deduction to the actual loss reduction in the FMV of lost or damaged prop- safe harbor method is available for casualty los-
resulting from damage to the property. erty using a competent appraisal or the cost of ses of $5,000 or less.

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Insurance method. The insurance safe that method for all your personal belongings, chair. You estimate that it would cost $500 to
harbor method allows you to figure the de- with certain exceptions identified in Revenue replace it. If you had sold the chair before the
crease in the FMV of your personal-use resi- Procedure 2018-08. flood, you estimate that you could have re-
dential real property based upon the estimated Each of these safe harbor methods is sub- ceived only $100 for it because it was 4 years
loss in reports prepared by your homeowners or ject to additional rules and exceptions. For ad- old. The chair wasn’t insured. Your loss is $100,
flood insurance company. These reports must ditional information, see Revenue Procedure the FMV of the chair before the flood. It isn’t
set forth the estimated loss you sustained from 2018-08. $500, the replacement cost.
the damage to or the destruction of your prop-
erty. Decreases to safe harbor loss amount. The Sentimental value. Don’t consider sentimen-
loss determined through the safe harbor meth- tal value when determining your loss. If a family
Federally declared disaster ods must be reduced by the value of any re- portrait, heirloom, or keepsake is damaged, de-
method—contractor safe harbor. If the loss pairs provided by a third party at no cost (for ex- stroyed, or stolen, you must base your loss on
occurred in a disaster area and was due to a ample, work done by volunteers or via its FMV, as limited by your adjusted basis in the
federally declared disaster, then you may use donations) to you. Additionally, reduce your property.
the contractor safe harbor method or the disas- loss by the amount of any insurance, reim-
ter loan appraisal method. Under the contractor bursements, or other compensation received. Decline in market value of property in or
safe harbor method, you may use the contract near casualty area. A decrease in the value of
price for the repairs specified in a contract pre- Reporting requirements on Form 4684. At- your property because it is in or near an area
pared by an independent and licensed contrac- tach a statement to Form 4684 stating that you that suffered a casualty, or that might again suf-
tor to determine the decrease in the FMV of used Revenue Procedure 2018-08 to determine fer a casualty, isn’t to be taken into considera-
your personal-use residential real property. This the amount of your casualty loss. Include the tion. You have a loss only for actual casualty
safe harbor method doesn’t apply unless you specific safe harbor method used. When com- damage to your property. However, if your
are subject to a binding contract signed by you pleting Form 4684, don’t enter an amount on home is in a federally declared disaster area,
and the contractor setting forth the itemized line 5 or line 6 for each property. Instead, enter see Disaster Area Losses, later.
costs to restore your personal-use residential the decrease in the FMV determined under the
real property to its condition immediately before relevant safe harbor method on line 7. Costs of photographs and appraisals. Pho-
the casualty. tographs taken after a casualty will be helpful in
For losses due to Hurricane Harvey, establishing the condition and value of the prop-
Federally declared disaster TIP Hurricane Irma, and Hurricane Maria, erty after it was damaged. Photographs show-
method—disaster loan appraisal. Under the see Revenue Procedure 2018-09, ing the condition of the property after it was re-
disaster loan appraisal safe harbor method, you 2018-2 I.R.B. 290, available at IRS.gov/irb/ paired, restored, or replaced may also be
may use an appraisal prepared to obtain a loan 2018-02_IRB#RP-2018-09, for the cost indexes helpful.
of federal funds or a loan guarantee from the safe harbor method.
federal government that identifies your estima- Appraisals are used to figure the decrease
ted loss from a federally declared disaster to in FMV because of a casualty or theft. See Ap-
determine the decrease in the FMV of your per- Figuring Decrease in FMV—Items praisal, earlier, under Figuring Decrease in
sonal-use residential real property. Not To Consider FMV—Items To Consider for information about
appraisals.
Personal belongings safe harbor methods. You generally shouldn’t consider the following The costs of photographs and appraisals
Personal belongings generally include items of items when attempting to establish the de- used as evidence of the value and condition of
tangible personal property owned by an individ- crease in FMV of your property. property damaged as a result of a casualty
ual who suffered a casualty or theft loss if they aren’t a part of the loss. They are expenses in
aren’t used in a trade or business. Personal be- Cost of protection. The cost of protecting determining your tax liability. For tax years 2018
longings don’t include an item that maintains or your property against a casualty or theft isn’t through 2025, they can no longer be deducted
increases its value over time or certain other part of a casualty or theft loss. The amount you as miscellaneous itemized deductions.
types of property. For more details, see Reve- spend on insurance or to board up your house
nue Procedure 2018-08. The safe harbor meth- against a storm isn’t part of your loss. If the
ods for personal belongings are the de minimis property is business property, these expenses Adjusted Basis
method and the replacement cost safe harbor are deductible as business expenses. The measure of your investment in the property
method for federally declared disasters. If you make permanent improvements to you own is its basis. For property you buy, your
your property to protect it against a casualty or basis is usually its cost to you. For property you
De minimis method. Under the de minimis theft, add the cost of these improvements to acquire in some other way, such as inheriting it,
method, you can make a good-faith estimate of your basis in the property. An example would receiving it as a gift, or getting it in a nontaxable
the decrease in the FMV of your personal be- be the cost of a dike to prevent flooding. exchange, you must figure your basis in another
longings. You must maintain records describing
your affected personal belongings as well as Exception. You can’t increase your basis in way, as explained in Pub. 551.
your methodology for estimating your loss. This the property by, or deduct as a business ex-
method is limited to losses of $5,000 or less. pense, any expenditures you made with respect Inherited property and the section 1022
to qualified disaster mitigation payments (dis- election. If you inherited property from some-
Replacement cost safe harbor method cussed later under Disaster Area Losses). one who died in 2010 and the executor of the
for federally declared disasters. The re- decedent’s estate made a section 1022 election
placement cost safe harbor method for federally Related expenses. The incidental expenses using Form 8939, Allocation of Increase in Ba-
declared disasters allows you to determine the due to a casualty or theft, such as expenses for sis for Property Acquired From a Decedent,
FMV of your personal belongings located in a the treatment of personal injuries, for temporary special rules regarding the basis would apply.
disaster area immediately before a federally de- housing, or for a rental car, aren’t part of your An executor of an estate of a decedent who
clared disaster to figure the amount of your casualty or theft loss. However, they may be died in 2010 could elect to apply a modified car-
casualty or theft loss. To use the replacement deductible as business expenses if the dam- ryover basis treatment to property acquired
cost safe harbor method, you must first deter- aged or stolen property is business property. from the decedent.
mine the current cost to replace your personal For more detailed information about the
belonging with a new one and then reduce that Replacement cost. The cost of replacing sto- Section 1022 Election, see Notice 2011-66,
amount by 10% for each year you have owned len or destroyed property isn’t part of a casualty 2011-35 I.R.B. 184, available at IRS.gov/irb/
the personal belonging. See the Personal Be- or theft loss. 2011-35_IRB#NOT-2011-66. For optional safe
longings Valuation Table in Revenue Procedure harbor guidance under section 1022, see Reve-
2018-08. If you choose to use the replacement Example. You bought a new chair 4 years nue Procedure 2011-41, 2011-35 I.R.B. 188,
cost safe harbor method, then you must use ago for $300. In April, a flood destroyed the

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available at IRS.gov/irb/ Take into consideration only the amount you didn’t because of the casualty or the threat of
2011-35_IRB#RP-2011-41. used to replace your destroyed or damaged one.
property.
Adjustments to basis. While you own the Example. As a result of a hurricane, you
property, various events may take place that Example. Your home was extensively dam- vacated your apartment for a month and moved
change your basis. Some events, such as addi- aged by a tornado. Your loss after reimburse- to a motel. You normally pay $525 a month for
tions or permanent improvements to the prop- ment from your insurance company was rent. None was charged for the month the
erty, increase basis. Others, such as earlier $10,000. Your employer set up a disaster relief apartment was vacated. Your motel rent for this
casualty losses and depreciation deductions, fund for its employees. Employees receiving month was $1,200. You normally pay $200 a
decrease basis. When you add the increases to money from the fund had to use it to rehabilitate month for food. Your food expenses for the
the basis and subtract the decreases from the or replace their damaged or destroyed property. month you lived in the motel were $400. You re-
basis, the result is your adjusted basis. See You received $4,000 from the fund and spent ceived $1,100 from your insurance company to
Pub. 551 for more information on figuring the the entire amount on repairs to your home. In cover your living expenses. You determine the
basis of your property. figuring your casualty loss, you must reduce payment you must include in income as follows.
your unreimbursed loss ($10,000) by the
$4,000 you received from your employer’s fund.
Insurance and Other Your casualty loss before applying the deduc- 1. Insurance payment for living
Reimbursements tion limits (discussed later) is $6,000. expenses . . . . . . . . . . . . . . . . . . . . . . $1,100
2. Actual expenses during the
If you receive an insurance or other type of re- Cash gifts. If you receive excludable cash gifts month you are unable to
imbursement, you must subtract the reimburse- as a disaster victim and there are no limits on use your home because of
ment when you figure your loss. You don’t have how you can use the money, you don’t reduce the hurricane . . . . . . . . . . . . $1,600
a casualty or theft loss to the extent you are re- your casualty loss by these excludable cash 3. Normal living expenses . . . 725
imbursed. gifts. This applies even if you use the money to 4. Temporary increase in
pay for repairs to property damaged in the dis- living expenses: Subtract line 3
If in the year of the casualty there is a claim aster. from line 2 . . . . . . . . . . . . . . . . . . . . . . 875
for reimbursement with a reasonable prospect
5. Amount of payment includible in
of recovery, the loss isn’t sustained until you Example. Your home was damaged by a income: Subtract line 4 from
know with reasonable certainty whether such hurricane. Relatives and neighbors made cash line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 225
reimbursement will be received. If you expect to gifts to you that were excludable from your in-
be reimbursed for part or all of your loss, you come. You used part of the cash gifts to pay for
must subtract the expected reimbursement repairs to your home. There were no limits or Tax year of inclusion. You include the tax-
when you figure your loss. You must reduce restrictions on how you could use the cash gifts. able part of the insurance payment in income
your loss even if you don’t receive payment until It was an excludable gift, so the money you re- for the year you regain the use of your main
a later tax year. See Reimbursement Received ceived and used to pay for repairs to your home home or, if later, for the year you receive the
After Deducting Loss, later. doesn’t reduce your casualty loss on the dam- taxable part of the insurance payment.
aged home.
Failure to file a claim for reimbursement. If Example. Your main home was destroyed
your property is covered by insurance, you Insurance payments for living expenses. by a tornado in June 2020. You regained use of
should file a timely insurance claim for reim- You don’t reduce your casualty loss by insur- your home in November 2021. The insurance
bursement of your loss. If you don’t file an insur- ance payments you receive to cover living ex- payments you received in 2020 and 2021 were
ance claim, you can’t deduct the full unrecov- penses in either of the following situations. $1,500 more than the temporary increase in
ered amount as a casualty or theft loss and only • You lose the use of your main home be- your living expenses during those years. You in-
the part of the loss that isn’t covered by your in- cause of a casualty. clude this amount in income on your 2021 Form
surance policy is deductible. • Government authorities don’t allow you ac- 1040. If, in 2022, you receive further payments
The portion of the loss usually not covered cess to your main home because of a to cover the living expenses you had in 2020
by insurance (for example, a deductible) isn’t casualty or threat of one. and 2021, you must include those payments in
income on your 2022 Form 1040 or 1040-SR.
subject to this rule. Inclusion in income. If these insurance
payments are more than the temporary in- Disaster relief. Food, medical supplies, and
Example. Your car insurance policy in- crease in your living expenses, you must in- other forms of assistance you receive don’t re-
cludes comprehensive coverage with a $1,000 clude the excess in your income. Report this duce your casualty loss, unless they are re-
deductible. Because your insurance doesn’t amount on Schedule 1 (Form 1040), line 8z. placements for lost or destroyed property.
cover the first $1,000 of damages resulting from However, if the casualty occurs in a federally Qualified disaster relief payments you
a storm, the $1,000 is deductible (subject to the declared disaster area, none of the insurance TIP receive for expenses you incurred as a
$100 and 10% rules, discussed later). This is payments are taxable. See Qualified disaster result of a federally declared disaster
true, even if you don’t file an insurance claim, relief payments, later, under Disaster Area Los- aren’t taxable income to you. For more informa-
because your insurance policy won’t reimburse ses. tion, see Qualified disaster relief payments un-
you for the deductible. A temporary increase in your living expen- der Disaster Area Losses, later.
ses is the difference between the actual living
Types of Reimbursements expenses you and your family incurred during Disaster unemployment assistance pay-
the period you couldn’t use your home and your ments are unemployment benefits that are taxa-
The most common type of reimbursement is an normal living expenses for that period. Actual ble.
insurance payment for your stolen or damaged living expenses are the reasonable and neces- Generally, disaster relief grants received un-
property. Other types of reimbursements are sary expenses incurred because of the loss of der the Stafford Act aren’t included in your in-
discussed next. Also see the Instructions for your main home. Generally, these expenses in- come. See Federal disaster relief grants, later,
Form 4684. clude the amounts you pay for the following. under Disaster Area Losses.
• Renting suitable housing.
Employer’s emergency disaster fund. If you • Transportation. Loan proceeds. Don’t reduce your casualty
receive money from your employer’s emer- • Food. loss by loan proceeds you use to rehabilitate or
gency disaster fund and you must use that • Utilities. replace property on which you are claiming a
money to rehabilitate or replace property on • Miscellaneous services. casualty loss deduction. If you have a federal
which you are claiming a casualty loss deduc- Normal living expenses consist of these same loan that is canceled (forgiven), see Federal
tion, you must take that money into considera- expenses that you would have incurred but loan canceled, later, under Disaster Area Los-
tion in computing the casualty loss deduction. ses.
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Table 2. Deduction Limit Rules for Personal-Use Property
$100 Rule 10% Rule
General Application You must reduce each casualty or theft loss by You must reduce your total casualty or theft
$100 when figuring your deduction. Apply this loss attributable to a federally declared disaster
rule to personal-use property after you have by 10% of your AGI. Apply this rule to
figured the amount of your loss.* personal-use property after you reduce each
loss by $100 (the $100 rule).**
Single Event Apply this rule only once, even if many pieces Apply this rule only once, even if many pieces
of property are affected. 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— Apply separately to each person. Apply separately to each person.
With Loss From the
Same Event
(other than a married couple
filing jointly)
Married Couple— Filing
With Loss From the Joint Apply as if you were one person. Apply as if you were one person.
Same Event Return
Filing
Separate Apply separately to each spouse. Apply separately to each spouse.
Return
More Than One Owner Apply separately to each owner of jointly Apply separately to each owner of jointly
(other than a married owned property. owned property.
couple filing jointly)
* Qualified disaster losses must be reduced by $500 when figuring your deduction. See Disaster Area Losses, later, for more information.
** The 10% rule doesn’t apply to qualified disaster losses. See Disaster Area Losses, later, for more information.
Reimbursement Received After collect any amount from the other driver. You as ordinary income up to the amount of your de-
Deducting Loss can deduct the loss in 2022 (to the extent it duction that reduced your tax for the earlier
doesn’t exceed your 2022 personal casualty year. You may be able to postpone reporting
If you figured your casualty or theft loss using gains) that is figured by applying the deduction any remaining gain as explained under Post-
the amount of your expected reimbursement, limits (discussed later). ponement of Gain, later.
you may have to adjust your tax return for the
tax year in which you get your actual reimburse- Actual reimbursement more than expected. Actual reimbursement same as expected. If
ment. This section explains the adjustment you If you later receive a larger reimbursement you later receive exactly the reimbursement you
may have to make. amount than you expected, after you have expected to receive, you don’t have to include
claimed a deduction for the loss, you may have any of the reimbursement in your income and
If you paid amounts to repair damage to include the extra reimbursement amount in you can’t deduct any additional loss.
! to a personal residence with a deterio- your income for the year you receive it. How-
CAUTION rating concrete foundation and claimed ever, if any part of the original deduction didn’t Example. In December 2022, your per-
a deduction on an original or amended federal reduce your tax for the earlier year, don’t in- sonal car was damaged in a flood that was a
income tax return and payments were made to clude that part of the reimbursement amount in federally declared disaster. Repairs to the car
you (or on your behalf to contractors) by the your income. You don’t refigure your tax for the cost $950. You had $100 deductible compre-
Connecticut Foundation Solutions Indemnity year you claimed the deduction. See Recover- hensive insurance. Your insurance company
Company (CFSIC), you must include some or ies in Pub. 525 to find out how much extra reim- agreed to reimburse you for the rest of the dam-
part of the payments in your gross income. See bursement to include in income. age. Because you expected a reimbursement
Announcement 2020-5, 2020-19 I.R.B. 796 from the insurance company, you didn’t have a
(available at IRS.gov/irb/ Example. In 2021, a hurricane that was a casualty loss deduction in 2022.
2020-19_IRB#ANN-2020-5 ). federally declared disaster destroyed your mo- Due to the $100 rule, you can’t deduct the
torboat. Your loss was $3,000, and you estima- $100 you paid as the deductible. When you re-
Actual reimbursement less than expected. ted that your insurance would cover $2,500 of it. ceive the $850 from the insurance company in
If you later receive less reimbursement than you You didn't itemize deductions on your 2021 re- 2023, don’t report it as income.
expected, include that difference as a loss with turn nor did you increase your standard deduc-
your other losses (if any) on your return for the tion by the amount of your loss. When the insur-
year in which you can reasonably expect no ance company reimburses you for the loss, you
more reimbursement. don’t report any of the reimbursement as in- Deduction Limits
come. This is true even if it is for the full $3,000
Example. Your personal car had an FMV of because you didn’t deduct the loss on your After you have figured the amount of your casu-
$2,000 when it was destroyed in a collision with 2021 return. The loss didn’t reduce your tax. alty or theft loss, you must figure how much of
the loss you can deduct.
another car in 2021. The accident was due to If the total of all the reimbursements
the negligence of the other driver. At the end of ! you receive is more than your adjusted The deduction for casualty and theft losses
2021, there was a reasonable prospect that the CAUTION basis in the destroyed or stolen prop- of personal-use property is limited. For tax
owner of the other car would reimburse you in erty, you will have a gain on the casualty or years 2018 through 2025, personal casualty
full. You didn’t have a deductible loss in 2021. theft. If you have already taken a deduction for and theft losses of an individual are deductible
In January 2022, the court awards you a a loss and you receive the reimbursement in a only to the extent they’re attributable to a feder-
judgment of $2,000. However, in July it be- later year, you may have to include the gain in ally declared disaster. Personal casualty and
comes apparent that you will be unable to your income for the later year. Include the gain theft losses attributable to a federally declared
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disaster are subject to the $100 per casualty Boat Equipment sisters live together in a home they own jointly
and 10% rules, discussed later. The $100 and and they have a casualty loss on the home, the
10% rules are also summarized in Table 2. 1. Loss . . . . . . . . . . . . . $5,000 $1,200 $100 rule applies separately to each sister.
An exception to the rule above, limiting the 2. Subtract
personal casualty and theft loss deduction to insurance . . . . . . . . . 4,500 -0- 10% Rule
losses attributable to a federally declared disas- 3. Loss after
ter, applies if you have personal casualty gains reimbursement . . . . $ 500 $1,200 You must reduce your total federal casualty los-
for the tax year. In this case, you may reduce 4. Total loss . . . . . . . . . . . . . . . . . $1,700 ses by 10% of your AGI. Apply this rule after
your personal casualty gains by any casualty 5. Subtract $100 . . . . . . . . . . . . . 100 you reduce each loss by $100. For more infor-
losses not attributable to a federally declared mation, see the Instructions for Form 4684. If
disaster. Any excess gain is used to reduce los- 6. Loss before 10% rule. . . . . $1,600 you have both gains and losses from casualties
ses from a federally declared disaster. The 10% or thefts, see Gains and losses, later in this dis-
rule is applied to any federal disaster losses Example 2. Thieves broke into your home cussion.
that remain. in January and stole a ring and a fur coat. You
Losses on business property and in- had a loss of $200 on the ring and $700 on the Example. In September, your house was
come-producing property aren’t subject to coat. This is a single theft. The $100 rule ap- damaged by a tropical storm that was a feder-
these rules. However, if your casualty or theft plies to the total $900 loss. ally declared disaster. Your loss after insurance
reimbursement was $2,000. Your AGI for the
loss involved a home you used for business or year the loss was sustained is $29,500. Figure
rented out, your deductible loss may be limited. Example 3. In October, hurricane winds
See the instructions for Form 4684, Section B. If blew the roof off your home. Flood waters your casualty loss as follows.
the casualty or theft loss involved property used caused by the hurricane further damaged your
in a passive activity, see Form 8582, Passive home and destroyed your furniture and per- 1. Loss after insurance . . . . . . . . . . $2,000
Activity Loss Limitations, and its instructions. sonal car. This is considered a single casualty. 2. Subtract $100 . . . . . . . . . . . . . . . . 100
The $100 rule is applied to your total loss from 3. Loss after $100 rule . . . . . . . . . . . $1,900
the flood waters and the wind. 4. Subtract 10% of $29,500
$100 Rule AGI . . . . . . . . . . . . . . . . . . . . . . . . . $2,950
More than one loss. If you have more than 5. Casualty loss deduction. . . . $ -0-
After you have figured your casualty or theft one casualty or theft loss during your tax year,
loss on personal-use property, as discussed you must reduce each loss by $100. You don’t have a casualty loss deduction
earlier, you must reduce that loss by $100. This because your loss ($1,900) is less than 10% of
reduction applies to each total casualty or theft Example. Your family car was damaged in your AGI ($2,950).
loss, including those losses not attributable to a a storm in January. Your loss after the insur-
federally declared disaster that are applied to ance reimbursement was $75. In February, your The 10% rule doesn’t apply to qualified
reduce your personal casualty gains. It doesn’t car was damaged in another storm. This time ! disaster losses. See Disaster Area
matter how many pieces of property are in- your loss after the insurance reimbursement CAUTION Losses, later, for more information.
volved in an event. Only a single $100 reduction was $90. Apply the $100 rule to each separate
applies. casualty loss. Since neither storm resulted in a More than one loss. If you have more than
loss of over $100, you aren’t entitled to any de- one casualty or theft loss during your tax year,
Example. You have $750 deductible colli- duction for these storms. reduce each loss by any reimbursement and by
sion insurance on your car. The car is damaged $100. Then, you must reduce your total federal
in a collision. The insurance company pays you More than one person. If two or more individ- casualty losses by 10% of your AGI.
for the damage minus the $750 deductible. The uals (other than spouses filing a joint return)
amount of the casualty loss is based solely on have losses from the same casualty or theft, the Example. In March, your car was de-
the deductible. The casualty loss is $650 ($750 $100 rule applies separately to each individual. stroyed in a flood that was a federally declared
− $100) because the first $100 of a casualty disaster. You didn’t have insurance on your car,
loss on personal-use property isn’t deductible. Example. Hurricane winds damaged your so you didn’t receive any insurance reimburse-
house and also damaged the personal property ment. Your loss on the car was $1,800. In No-
Qualified disaster losses must be re- of your house guest. You must reduce your loss vember, another flood, which was also a feder-
! duced by $500. See Disaster Area Los- by $100. Your house guest must reduce his or ally declared disaster, damaged your basement
CAUTION ses, later, for more information.
her loss by $100. and totally destroyed the furniture, washer,
Single event. Generally, events closely rela- Married taxpayers. If you and your spouse dryer, and other items you had stored there.
ted in origin cause a single casualty. It is a sin- file a joint return, you are treated as one individ- Your loss on the basement items after reim-
gle casualty when the damage is from two or ual in applying the $100 rule. It doesn’t matter bursement from your insurer was $2,100. Your
more closely related causes, such as wind and whether you own the property jointly or sepa- AGI for the year that the floods occurred is
flood damage caused by the same storm. A sin- rately. $25,000. You figure your casualty loss deduc-
gle casualty may also damage two or more If you and your spouse have a casualty or tion as follows.
pieces of property, such as a tornado that dam- theft loss and you file separate returns, each of
ages both your home and your car parked in you must reduce your loss by $100. This is true Car Basement
your driveway. even if you own the property jointly. If one 1. Loss . . . . . . . . . . . . . . $1,800 $2,100
spouse owns the property, only that spouse can 2. Subtract $100 per
Example 1. A tornado destroyed your claim a loss deduction on a separate return. incident . . . . . . . . . . . 100 100
pleasure boat. You also lost some boating If the casualty or theft loss is on property you
equipment in the storm. Your loss was $5,000 own as tenants by the entirety, each of you can 3. Loss after $100
on the boat and $1,200 on the equipment. Your figure your deduction on only one-half of the rule . . . . . . . . . . . . . . . $1,700 $2,000
insurance company reimbursed you $4,500 for loss on separate returns. Neither of you can fig- 4. Total loss . . . . . . . . . . . . . . . . . . $3,700
the damage to your boat. You had no insurance ure your deduction on the entire loss on a sepa- 5. Subtract 10% of $25,000
coverage on the equipment. Your casualty loss rate return. Each of you must reduce the loss by AGI . . . . . . . . . . . . . . . . . . . . . . . 2,500
is from a single event and the $100 rule applies $100. 6. Casualty loss deduction. . . $1,200
once. Figure your loss before applying the 10%
rule (discussed later) as follows. More than one owner. If two or more individu-
als (other than spouses filing a joint return) have Married taxpayers. If you and your spouse file
a loss on property jointly owned, the $100 rule a joint return, you are treated as one individual
applies separately to each. For example, if two

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in applying the 10% rule. It doesn’t matter if you    Example  1.     In  June,  a  tornado  destroyed              Personal  property.  Personal  property  is  any 
own the property jointly or separately.               your lakeside cottage, which cost $144,800 (in-               property that isn’t real property. If your personal 
If you file separate returns, the 10% rule ap-        cluding $14,500 for the land) several years ago.              property  is  stolen  or  is  damaged  or  destroyed 
plies to each return on which a loss is claimed.      (Your  land  wasn’t  damaged.)  This  was  your               by a casualty, you must figure your loss sepa-
                                                      only casualty or theft loss for the year. The FMV             rately for each item of property. Then combine 
More than one owner.    If two or more individu-      of the property immediately before the tornado                these  separate  losses  to  figure  the  total  loss. 
als (other than spouses filing a joint return) have   was  $180,000  ($145,000  for  the  cottage  and              Reduce the total loss by $100 and 10% of your 
a loss on property that is owned jointly, the 10%     $35,000 for the land). The FMV immediately af-                AGI to figure the loss deduction.
rule applies separately to each.                      ter the tornado was $35,000 (value of the land). 
                                                      You  collected  $130,000  from  the  insurance                Example 1.   In August, a storm that was de-
Gains  and  losses.   If  you  have  casualty  or     company. Your AGI for the year the tornado oc-                termined to be a federally declared disaster de-
theft  gains  as  well  as  losses  to  your  per-    curred is $80,000. Your deduction for the casu-               stroyed  your  pleasure  boat,  which  cost 
sonal-use property, you must compare your to-         alty loss is $6,700, figured in the following man-            $18,500.  This  was  your  only  casualty  or  theft 
tal gains to your total losses. Do this after you     ner.                                                          loss  for  the  year.  Its  FMV  immediately  before 
have reduced each loss by any reimbursements                                                                        the storm was $17,000. You had no insurance, 
and by $100 but before you have reduced the           1. Adjusted basis of the entire                               but were able to salvage the motor of the boat 
federal casualty losses by 10% of your AGI.                property (cost in this                                   and  sell  it  for  $200.  Your  AGI  for  the  year  the 
        Casualty  or  theft  gains  don’t  include         example)   . . . . . . . . . . . . . . . . . .  $144,800 casualty occurred is $70,000.
                                                      2. FMV of entire property                                     Although the motor was sold separately, it is 
!       gains  you  choose  to  postpone.  See             before tornado . . . . . . . . . . . . .        $180,000 part of the boat and not a separate item of prop-
CAUTION Postponement of Gain, later.
                                                      3. FMV of entire property after                               erty. You figure your casualty loss deduction as 
Losses  more  than  gains.       If  your  losses          tornado . . . . . . . . . . . . . . . . . . .   35,000   follows.
are more than your recognized gains, subtract         4. Decrease in FMV of entire 
your gains from your losses and reduce the re-             property (line 2 − line 3) . . . . .            $145,000 1. Adjusted basis (cost in this 
                                                                                                                        example) . . . . . . . . . . . . . . . . . .      $18,500
sult by 10% of your AGI. The rest, if any, is your    5. Loss (smaller of line 1 or                                                      . . . . . . . . . .              $17,000
deductible loss from personal-use property.                line 4) . . . . . . . . . . . . . . . . . . . . $144,800 2. FMV before storm
If you have losses not attributable to a feder-       6. Subtract insurance  . . . . . . . . .             130,000  3. FMV after storm   . . . . . . . . . . . .          200
ally  declared  disaster,  see Line  14  in  the  In-                                                               4. Decrease in FMV 
structions for Form 4684. Losses not attributa-       7. Loss after reimbursement     . . .                $14,800                       . . . . . . . . . . . . .        $16,800
ble to a federally declared disaster can be used      8. Subtract $100 . . . . . . . . . . . . .           100          (line 2 − line 3)
only to offset gains.                                 9. Loss after $100 rule     . . . . . . . .          $14,700  5. Loss (smaller of line 1 or 
If  you  have  qualified  disaster  losses,  see      10. Subtract 10% of $80,000                                       line 4) . . . . . . . . . . . . . . . . . . . . . $16,800
Line  15  in  the  Instructions  for  Form  4684  for      AGI . . . . . . . . . . . . . . . . . . . . . . 8,000    6. Subtract insurance  . . . . . . . . . .            -0-
more details.                                         11. Casualty loss deduction. . .                     $ 6,700  7. Loss after reimbursement   . . . .                 $16,800
                                                                                                                    8. Subtract $100     . . . . . . . . . . . . . .      100
by reimbursements and by $100 is $2,700. Your         Example  2.     You  bought  your  home  a  few               9. Loss after $100 rule
Example.      Your  theft  loss  after  reducing  it                                                                                       . . . . . . . . .              $16,700
casualty gain is $700. Because your theft loss        years ago. You paid $150,000 ($10,000 for the                 10. Subtract 10% of $70,000 
wasn’t attributable to a federally declared disas-    land  and  $140,000  for  the  house).  You  also                 AGI . . . . . . . . . . . . . . . . . . . . . . . 7,000
ter, you can only use $700 of your loss to offset     spent  an  additional  $2,000  for  landscaping.              11. Casualty loss deduction. . .                      $ 9,700
the $700 casualty gain.                               This  year  a  hurricane  destroyed  your  home. 
                                                      The hurricane also damaged the shrubbery and                  Example  2.  In  June,  you  were  involved  in 
Gains  more  than  losses.       If  your  recog-     trees in your yard. The hurricane was your only               an auto accident that totally destroyed your per-
nized gains are more than your losses, subtract       casualty or theft loss this year. Competent ap-               sonal car and your antique pocket watch. You 
your  losses  from  your  gains.  The  difference  is praisers  valued  the  property  as  a  whole  at             had bought the car for $30,000. The FMV of the 
treated as a capital gain and must be reported        $175,000  before  the  hurricane,  but  only                  car  just  before  the  accident  was  $17,500.  Its 
on  Schedule  D  (Form  1040).  The  10%  rule        $50,000  after  the  hurricane.  Shortly  after  the          FMV  just  after  the  accident  was  $180  (scrap 
doesn’t apply to your gains. If you have losses       hurricane,  the  insurance  company  paid  you                value).  Your  insurance  company  reimbursed 
not attributable to a federally declared disaster,    $95,000  for  the  loss.  Your  AGI  for  this  year  is      you $16,000.
see Line 14 in the Instructions for Form 4684.        $70,000.  You  figure  your  casualty  loss  deduc-           Your  watch  wasn’t  insured.  You  had  pur-
                                                      tion as follows.
Example.      Your  theft  loss  is  $600  after  re-                                                               chased it for $250. Its FMV just before the acci-
                                                                                                                    dent was $500. In the same year, you also had 
ducing it by reimbursements and by $100. Your         1. Adjusted basis of the entire                               a $2,000 casualty gain and a separate $5,000 
casualty  gain  is  $1,600.  Because  your  gain  is       property (cost of land,                                  casualty loss attributable to a federally declared 
more than your loss, you must report the $1,000            building, and landscaping) . . .                $152,000
                                                                                                                    disaster. Your AGI for the year is $97,000. Your 
net gain ($1,600 − $600) on Schedule D (Form          2. FMV of entire property                                     casualty  loss  deduction  is  zero,  figured  as  fol-
1040).                                                     before hurricane . . . . . . . . . . .          $175,000 lows.
More information.       For information on how        3. FMV of entire property after 
to figure recognized gains, see Figuring a Gain,           hurricane  . . . . . . . . . . . . . . . . .    50,000
later.                                                4. Decrease in FMV of entire 
                                                           property (line 2 − line 3)                      $125,000
Figuring the Deduction                                5. Loss (smaller of line 1 or 
                                                           line 4) . . . . . . . . . . . . . . . . . . . . $125,000
Generally, you must figure your loss separately       6. Subtract insurance  . . . . . . . . .             95,000
for  each  item  stolen,  damaged,  or  destroyed.    7. Loss after reimbursement     . . .                $30,000
However, a special rule applies to real property      8. Subtract $100 . . . . . . . . . . . . .           100
you own for personal use.                                                         . . . . . . . .          $29,900
                                                      9. Loss after $100 rule
Real property. In figuring a loss to real estate      10. Subtract 10% of $70,000 
you  own  for  personal  use,  all  improvements           AGI . . . . . . . . . . . . . . . . . . . . . . 7,000
(such  as  buildings  and  ornamental  trees  and     11. Casualty loss deduction. . .                     $ 22,900
the land containing the improvements) are con-
sidered together.
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                                           Car            Watch  1. Adjusted basis of real                                                                     Business Personal 
1. Adjusted basis                                                    property (cost in this                                                                    Part     Part
    (cost) . . . . . . . . . . . . . . . . $30,000        $250       example)  . . . . . . . . . . . . . . . . .     $164,000
                                                                                                                              1. Cost (total 
                                                                 2. FMV of real property before                                   $400,000) . . . . . . .      $200,000 $200,000
2. FMV before                                                        hurricane . . . . . . . . . . . . . . . . .     $170,000 2. Subtract 
    accident   . . . . . . . . . . . . .   $17,500        $500   3. FMV of real property after                                    depreciation . . . . .       24,000       -0-
3. FMV after accident . . . .              180            -0-        hurricane . . . . . . . . . . . . . . . . .     100,000  3. Adjusted basis . . .          $176,000 $200,000
4. Decrease in FMV                                               4. Decrease in FMV of real                                   4. FMV before flood 
    (line 2 − line 3) . . . . . . . .      $17,320        $500       property (line 2 − line 3) . . . .              $70,000
                                                                                                                                  (total 
5. Loss (smaller of line 1                                       5. Loss on real property                                         $380,000) . . . . . . .      $190,000 $190,000
    or line 4) . . . . . . . . . . . . .   $17,320        $250       (smaller of line 1 or                                    5. FMV after flood 
6. Subtract insurance . . . .              16,000         -0-        line 4) . . . . . . . . . . . . . . . . . . . . $70,000      (total 
7. Loss after                                                                                                                     $320,000) . . . . . . .      160,000  160,000
                                                                 6. Subtract insurance     . . . . . . . .           50,000
    reimbursement     . . . . . . .        $1,320         $250   7. Loss on real property after                               6. Decrease in FMV 
                                                                     reimbursement     . . . . . . . . . . . .       $20,000      (line 4 − line 5) . . .      $30,000  $30,000
8. Total loss  . . . . . . . . . . . . . . . . . . . .    $1,570                                                              7. Loss (smaller of 
9. Subtract $100  . . . . . . . . . . . . . . . .         100    8. Loss on furnishings    . . . . . . . .           $600         line 3 or line 6) . . .      $30,000  $30,000
                                                                 9. Subtract insurance     . . . . . . . .           -0-
10. Loss not attributable to a                                                                                                8. Subtract 
    federally declared disaster after                            10. Loss on furnishings after                                    insurance . . . . . . .      20,000   20,000
    $100 rule  . . . . . . . . . . . . . . . . . . . . .  $1,470     reimbursement     . . . . . . . . . . . .       $600     9. Loss after 
                                                                                                                                  reimbursement . . .          $10,000  $10,000
11. Casualty gain . . . . . . . . . . . . . . . . .       $2,000 11. Total loss (line 7 plus                                  10. Subtract $100 on 
12. Casualty loss not attributable to a                              line 10) . . . . . . . . . . . . . . . . . . .  $20,600      personal-use 
    federally declared disaster            . . . . . .    1,470  12. Subtract $100     . . . . . . . . . . . . .     100          property . . . . . . . .     -0-      100
13. Remaining gain after offsetting                              13. Loss after $100 rule   . . . . . . .            $20,500  11. Loss after $100 
    the loss not attributable to a                               14. Subtract 10% of $65,000                                      rule . . . . . . . . . . . . $10,000  $9,900
    federally declared disaster                                      AGI . . . . . . . . . . . . . . . . . . . . . . 6,500    12. Subtract 10% of 
    (line 11 – line 12; if zero or less,                         15. Casualty loss deduction. .                      $14,000      $125,000 AGI on 
    enter -0-) . . . . . . . . . . . . . . . . . . . . .  $530                                                                    personal-use 
14. Casualty loss attributable to a                                                                                               property   . . . . . . . .   -0-      12,500
    federally declared disaster            . . . . . .    $5,000 Property  used  partly  for  business  and                   13. Deductible 
15. Subtract $100 . . . . . . . . . . . . . . . .         100    partly for personal purposes.    When property                   business loss . .            $10,000
16. Loss after $100 rule . . . . . . . . . . .            $4,900 is used partly for personal purposes and partly              14. Deductible
                                                                 for business or income-producing purposes, the                   personal loss. . . . . . . . . . .    $ -0-
17. Subtract remaining gain                                      casualty or theft loss deduction must be figured 
    (line 13) . . . . . . . . . . . . . . . . . . . . . . 530
                                                                 separately for the personal-use portion and for 
18. Loss after subtracting gain            . . . . . .    $4,370 the business or income-producing portion. You 
19. Subtract 10% of $97,000 AGI            . . .          9,700  must  figure  each  loss  separately  because  the 
20. Casualty loss deduction                                      losses attributed to these two uses are figured              Figuring a Gain
    attributable to a federally                                  in two different ways. When figuring each loss, 
    declared disaster . . . . . . . . .                    $ -0- allocate the total cost or basis, the FMV before             If you receive an insurance payment or other re-
                                                                 and after the casualty or theft loss, and the in-            imbursement  that  is  more  than  your  adjusted 
Both real and personal properties.                        When a surance  or  other  reimbursement  between  the              basis  in  the  destroyed,  damaged,  or  stolen 
casualty involves both real and personal prop-                   business and personal use of the property. The               property, you have a gain from the casualty or 
erties,  you  must  figure  the  loss  separately  for           $100  rule  and  the  10%  rule  apply  only  to  the        theft. Your gain is figured as follows.
each  type  of  property.  However,  you  apply  a               casualty or theft loss on the personal-use por-                  The amount you receive (discussed next), 
single  $100  reduction  to  the  total  loss.  Then,            tion of the property.                                        •
                                                                                                                                  minus
you  apply  the  10%  rule  to  figure  the  casualty            Example.     You own a building that you con-                •   Your adjusted basis in the property at the 
loss deduction.                                                  structed  on  leased  land.  You  use  half  of  the             time of the casualty or theft. See Adjusted 
Example.       In July, a hurricane, which was a                 building  for  your  business  and  you  live  in  the           Basis, earlier, for more information.
federally  declared  disaster,  damaged  your                    other  half.  The  cost  of  the  building  was               Even  if  the  decrease  in  FMV  of  your  prop-
home, which cost you $164,000 including land.                    $400,000.  You  made  no  further  improvements              erty  is  smaller  than  the  adjusted  basis  of  your 
The  FMV  of  the  property  (both  building  and                or additions to it.                                          property, use your adjusted basis to figure the 
land)  immediately  before  the  storm  was                      In March, a flood that was determined to be                  gain.
$170,000  and  its  FMV  immediately  after  the                 a federally declared disaster damaged the en-
storm  was  $100,000.  Your  household  furnish-                 tire  building.  The  FMV  of  the  building  was            Amount you receive.              The amount you receive 
ings  were  also  damaged.  You  separately  fig-                $380,000  immediately  before  the  flood  and               includes any money plus the value of any prop-
ured the loss on each damaged household item                     $320,000 afterwards. Your insurance company                  erty you receive minus any expenses you incur 
and arrived at a total loss of $600.                             reimbursed you $40,000 for the flood damage.                 in obtaining reimbursement. It also includes any 
You  collected  $50,000  from  the  insurance                    Depreciation on the business part of the build-              reimbursement  used  to  pay  off  a  mortgage  or 
company  for  the  damage  to  your  home,  but                  ing  before  the  flood  totaled  $24,000.  Your  ad-        other lien on the damaged, destroyed, or stolen 
your  household  furnishings  weren’t  insured.                  justed  gross  income  for  the  year  the  flood  oc-       property.
Your AGI for the year the hurricane occurred is                  curred is $125,000.
$65,000.  You  figure  your  casualty  loss  deduc-              You  have  a  deductible  business  casualty                  Example.        A  hurricane  destroyed  your  per-
tion from the hurricane in the following manner.                 loss  of  $10,000.  You  don’t  have  a  deductible          sonal  residence  and  the  insurance  company 
                                                                 personal casualty loss because of the 10% rule.              awarded you $145,000. You received $140,000 
                                                                 You figure your loss as follows.                             in cash. The remaining $5,000 was paid directly 
                                                                                                                              to the holder of a mortgage on the property. The 
                                                                                                                              amount you received includes the $5,000 reim-
                                                                                                                              bursement paid on the mortgage.

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Main home destroyed. If you have a gain be- cottage this January, the cottage was worth still postpone reporting the gain if you meet the
cause your main home was destroyed, you can $250,000. You received $146,000 from the in- other requirements.
generally exclude the gain from your income as surance company in March. You had a gain of
if you had sold or exchanged your home. You $128,000 ($146,000 − $18,000). Advance payment. If you pay a contractor in
may be able to exclude up to $250,000 of the You spent $144,000 to rebuild the cottage. advance to replace your destroyed or stolen
gain (up to $500,000 if married filing jointly). To Because this is less than the insurance pro- property, you aren’t considered to have bought
exclude a gain, you must generally have owned ceeds received, you must include $2,000 replacement property unless it is finished before
and lived in the property as your main home for ($146,000 − $144,000) in your income. the end of the replacement period. See Re-
at least 2 years during the 5-year period ending placement Period, later.
on the date it was destroyed. For information on Buying replacement property from a related
this exclusion, see Pub. 523. If your gain is person. You can’t postpone reporting a gain Similar or related in service or use. Re-
more than the amount you can exclude, but you from a casualty or theft if you buy the replace- placement property must be similar or related in
buy replacement property, you may be able to ment property from a related person (discussed service or use to the property it replaces.
postpone reporting the excess gain. See Post- later). This rule applies to the following taxpay-
ponement of Gain, later. ers. Timber loss. Standing timber (not land)
you bought with the proceeds from the sale of
Reporting a gain. You must generally report 1. C corporations. timber downed by a casualty (such as high
your gain as income in the year you receive the 2. Partnerships in which more than 50% of winds, earthquakes, or volcanic eruptions)
reimbursement. However, you don’t have to re- the capital or profits interests is owned by qualifies as replacement property. If you bought
port your gain if you meet certain requirements C corporations. the standing timber within the specified replace-
ment period, you can postpone reporting the
and choose to postpone reporting the gain ac- 3. All others (including individuals, partner- gain.
cording to the rules explained under Postpone- ships (other than those in (2)), and S cor-
ment of Gain next. porations) if the total realized gain for the Owner-user. If you are an owner-user,
For information on how to report a gain, see tax year on all destroyed or stolen proper- “similar or related in service or use” means that
How To Report Gains and Losses, later. ties on which there are realized gains is replacement property must function in the same
If you have a casualty or theft gain on more than $100,000. way as the property it replaces.
! personal-use property that you choose For casualties and thefts described in (3) Example. Your home was destroyed by fire
CAUTION to postpone reporting (as explained
next) and you also have another casualty or above, gains can’t be offset by any losses when and you invested the insurance proceeds in a
theft loss on personal-use property, don’t con- determining whether the total gain is more than grocery store. Your replacement property isn’t
sider the gain you are postponing when figuring $100,000. If the property is owned by a partner- similar or related in service or use to the de-
your casualty or theft loss deduction. See 10% ship, the $100,000 limit applies to the partner- stroyed property. To be similar or related in
Rule under Deduction Limits, earlier. ship and each partner. If the property is owned service or use, your replacement property must
by an S corporation, the $100,000 limit applies also be used by you as your home.
to the S corporation and each shareholder.
Main home in disaster area. Special rules
Postponement of Gain Exception. This rule doesn’t apply if the re- apply to replacement property related to the
lated person acquired the property from an un- damage or destruction of your main home (or its
Don’t report a gain if you receive reimburse- related person within the period of time allowed contents) if located in a federally declared dis-
ment in the form of property similar or related in for replacing the destroyed or stolen property. aster area. For more information, see Gains Re-
service or use to the destroyed or stolen prop- alized on Homes in Disaster Areas, later.
erty. Your basis in the new property is generally Related persons. Under this rule, related
the same as your adjusted basis in the property persons include, for example, a parent and Owner-investor. If you are an owner-in-
it replaces. child, a brother and sister, a corporation and an vestor, “similar or related in service or use”
individual who owns more than 50% of its out- means that any replacement property must
You must ordinarily report the gain on your standing stock, and two partnerships in which have a similar relationship of services or uses to
stolen or destroyed property if you receive the same C corporations own more than 50% of you as the property it replaces. You decide this
money or unlike property as reimbursement. the capital or profits interests. For more infor- by determining all of the following.
However, you can choose to postpone report- mation on related persons, see Nondeductible • Whether the properties are of similar serv-
ing the gain if you purchase property that is sim- Loss under Sales and Exchanges Between Re- ice to you.
ilar or related in service or use to the stolen or lated Persons in chapter 2 of Pub. 544. • The nature of the business risks connected
destroyed property within a specified replace- with the properties.
ment period, discussed later. You can also Death of a taxpayer. If a taxpayer dies after • What the properties demand of you in the
choose to postpone reporting the gain if you having a gain but before buying replacement way of management, service, and relations
purchase a controlling interest (at least 80%) in property, the gain must be reported for the year to your tenants.
a corporation owning property that is similar or in which the decedent realized the gain. The ex-
related in service or use to the property. See ecutor of the estate or the person succeeding to Example. You owned land and a building
Controlling interest in a corporation, later. the funds from the casualty or theft can’t post- you rented to a manufacturing company. The
If you have a gain on damaged property, pone reporting the gain by buying replacement building was destroyed by a tornado. During the
you can postpone reporting the gain if you property. replacement period, you had a new building
spend the reimbursement to restore the prop- constructed. You rented out the new building for
erty. Replacement Property use as a wholesale grocery warehouse. Be-
cause the replacement property is also rental
property, the two properties are considered
To postpone reporting all the gain, the cost You must buy replacement property for the spe- similar or related in service or use if there is a
of your replacement property must be at least cific purpose of replacing your destroyed or sto- similarity in all of the following areas.
as much as the reimbursement you receive. If len property. Property you acquire as a gift or • Your management activities.
the cost of the replacement property is less than inheritance doesn’t qualify. • The amount and kind of services you pro-
the reimbursement, you must include the gain in
your income up to the amount of the unspent re- vide to your tenants.
imbursement. You don’t have to use the same funds you • The nature of your business risks connec-
receive as reimbursement for your old property ted with the properties.
Example. In 1970, you bought an ocean- to acquire the replacement property. If you
front cottage for your personal use at a cost of spend the money you receive from the insur- Business or income-producing property
$18,000. You made no further improvements or ance company for other purposes, and borrow located in a federally declared disaster
additions to it. When a storm destroyed the money to buy replacement property, you can area. If your destroyed business or

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income-producing property was located in a company reimbursed you $67,000 for the prop- Ordinarily, requests for extensions aren’t
federally declared disaster area, any tangible erty, which had an adjusted basis of $62,000. made or granted until near the end of the re-
replacement property you acquire for use in any You had a gain of $5,000 from the casualty. If placement period or the extended replacement
business is treated as similar or related in serv- you have another rental home constructed for period. Extensions are usually limited to a pe-
ice or use to the destroyed property. The re- $110,000 within the replacement period, you riod of not more than 1 year. The high market
placement property doesn’t have to be located can postpone reporting the gain. You will have value or scarcity of replacement property isn’t
in the federally declared disaster area. For more reinvested all the reimbursement (including sufficient grounds for granting an extension. If
information, see Disaster Area Losses, later. your entire gain) in the new rental home. Your your replacement property is being constructed
basis for the new rental home will be $105,000 and you clearly show that the construction can’t
Controlling interest in a corporation. You ($110,000 cost − $5,000 postponed gain). be completed within the replacement period,
can replace property by acquiring a controlling you may be granted an extension of the period.
interest in a corporation that owns property sim- Replacement Period
ilar or related in service or use to your dam- Gains Realized on Homes in
aged, destroyed, or stolen property. You can Disaster Areas
postpone reporting your entire gain if the cost of To postpone reporting your gain, you must buy
the stock that gives you a controlling interest is replacement property within a specified period
at least as much as the amount received (reim- of time. This is the replacement period. The following rules apply if your main home was
located in an area declared by the President of
bursement) for your property. You have a con- the United States to warrant federal assistance
trolling interest if you own stock having at least The replacement period begins on the date as the result of a disaster, and the home or any
80% of the combined voting power of all your property was damaged, destroyed, or sto- of its contents were damaged or destroyed due
classes of voting stock and at least 80% of the len. to the disaster. These rules also apply to rent-
total number of shares of all other classes of ers who receive insurance proceeds for dam-
stock. The replacement period ends 2 years after aged or destroyed property in a rented home
Basis adjustment to corporation’s prop- the close of the first tax year in which any part of that is their main home.
erty. The basis of property held by the corpora- your gain is realized.
1. No gain is recognized on any insurance
tion at the time you acquired control must be re- Example. You are a calendar year tax- proceeds received for unscheduled per-
duced by the amount of your postponed gain, if payer. While you were on vacation, a valuable sonal property that was part of the con-
any. You aren’t required to reduce the adjusted piece of antique furniture that cost $2,200 was tents of the home.
basis of the corporation’s properties below your stolen from your home. You discovered the 2. Any other insurance proceeds you receive
adjusted basis in the corporation’s stock (deter- theft when you returned home on July 7, 2022. for the home or its contents are treated as
mined after reduction by the amount of your Your insurance company investigated the theft received for a single item of property, and
postponed gain). and didn’t settle your claim until January 22, any replacement property you purchase
Allocate this reduction to the following 2023, when they paid you $3,000. You first real- that is similar or related in service or use to
classes of property in the order shown below. ized a gain from the reimbursement for the theft the home or its contents is treated as simi-
1. Property that is similar or related in service during 2023, so you have until December 31, lar or related in service or use to that sin-
or use to the destroyed or stolen property. 2025, to replace the property. gle item of property. Therefore, you can
choose to recognize gain only to the ex-
2. Depreciable property not reduced in (1). Main home in disaster area. For your main tent the insurance proceeds treated as re-
3. All other property. home (or its contents) located in a federally de- ceived for that single item of property ex-
clared disaster area, the replacement period ceed the cost of the replacement property.
If two or more properties fall in the same class, generally ends 4 years after the close of the first
allocate the reduction to each property in pro- tax year in which any part of your gain is real- 3. If you choose to postpone any gain from
portion to the adjusted bases of all the proper- ized. See Disaster Area Losses, later. the receipt of insurance or other reim-
ties in that class. The reduced basis of any sin- bursement for your main home or any of
gle property can’t be less than zero. Example. You are a calendar year tax- its contents, the period in which you must
payer. A hurricane destroyed your home in Sep- purchase replacement property is exten-
Main home replaced. If your gain from the re- tember 2022. In December 2022, the insurance ded until 4 years after the end of the first
imbursement you receive because of the de- company paid you $3,000 more than the adjus- tax year in which any part of the gain is re-
struction of your main home is more than the ted basis of your home. The area in which your alized.
amount you can exclude from your income (see home is located isn’t a federally declared disas- For details on how to postpone gain, see How
Main home destroyed under Figuring a Gain, ter area. You first realized a gain from the reim- To Postpone a Gain, later.
earlier), you can postpone reporting the excess bursement for the casualty in 2022, so you have
gain by buying replacement property that is until December 31, 2024, to replace the prop- Example. Your main home and its contents
similar or related in service or use. To postpone erty. If your home had been in a federally de- were completely destroyed in 2022 by a tor-
reporting all the excess gain, the replacement clared disaster area, you would have until De- nado in a federally declared disaster area. In
property must cost at least as much as the cember 31, 2026, to replace the property. 2022, you received insurance proceeds of
amount you received because of the destruc-
tion minus the excluded gain. Extension. You can apply for an extension of $200,000 for the home, $25,000 for unsched-
Also, if you postpone reporting any part of the replacement period. Send your written ap- uled personal property in your home, $5,000 for
your gain under these rules, you are treated as plication to the Internal Revenue Service Center jewelry, and $10,000 for a stamp collection.
having owned and used the replacement prop- where you file your tax return. See your tax re- No gain is recognized on the $25,000 of in-
erty as your main home for the period you turn instructions or go to Where To File Paper surance proceeds you received for the un-
owned and used the destroyed property as your Tax Returns With or Without a Payment on scheduled personal property.
main home. IRS.gov for the address. Your application must The jewelry and stamp collection were kept
contain all the details about the need for the ex- in your home and were scheduled property on
Basis of replacement property. You must re- tension. You should apply before the end of the your insurance policy. Your home and its re-
duce the basis of your replacement property (its replacement period. placement contents are considered a single
item of property for the purpose of recognizing
cost) by the amount of postponed gain. In this However, you can file an application within a gain on the involuntary conversion your home
way, tax on the gain is postponed until you dis- reasonable time after the replacement period and its contents.
pose of the replacement property. ends if you have a good reason for the delay. If you reinvest the remaining insurance pro-
An extension may be granted if you can show ceeds of $215,000 in a replacement home and
Example. A fire destroyed your rental that there is reasonable cause for not making
home that you never lived in. The insurance the replacement within the replacement period.

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its replacement contents, you can elect to post-        can’t  later  substitute  other  qualified  replace-  Losses.  Generally, you can deduct a casualty 
pone any gain on your home, jewelry, or stamp           ment property. This is true even if you acquire       loss that isn’t reimbursable only in the tax year 
collection.                                             the  other  property  within  the  replacement  pe-   in which the casualty occurred. This is true even 
If  you  reinvest  less  than  the  remaining           riod. However, if you discover that the original      if you don’t repair or replace the damaged prop-
$215,000  of  insurance  proceeds  in  a  replace-      replacement  property  wasn’t  qualified  replace-    erty  until  a  later  year.  (However,  see Disaster 
ment  home  and  its  replacement  contents,  you       ment property, you can (within the replacement        Area Losses, later, for an exception.)
recognize any gain to the extent the $215,000           period)  substitute  the  new  qualified  replace-    You can deduct theft losses that aren’t reim-
of insurance proceeds exceeds the amount you            ment property.                                        bursable  only  in  the  year  you  discover  your 
invest  in  a  replacement  home  and  its  replace-                                                          property was stolen.
ment contents.                                          Amended  return.   You  must  file  an  amended       If in the year of the casualty there is a claim 
To  postpone  the  gain,  you  must  purchase           return (individuals use Form 1040-X) for the tax      for  reimbursement  with  a  reasonable  prospect 
the replacement property before 2027. Your ba-          year of the gain in either of the following situa-    of  recovery,  the  loss  isn’t  sustained  until  you 
sis in the replacement property equals its cost         tions.                                                know  with  reasonable  certainty  whether  such 
decreased  by  the  amount  of  any  postponed          •  You don’t acquire replacement property             reimbursement  will  be  received.  If  you  aren’t 
gain.                                                      within the required replacement period             sure whether part of your casualty or theft loss 
                                                           plus extensions. On this amended return,           will  be  reimbursed,  don’t  deduct  that  part  until 
How To Postpone a Gain                                     you must report the gain and pay any addi-         the tax year when you become reasonably cer-
                                                           tional tax due.                                    tain  that  it  won’t  be  reimbursed.  The  later  tax 
You postpone reporting your gain from a casu-           •  You acquire replacement property within            year is when your loss is sustained.
alty or theft by reporting your choice on your tax         the required replacement period plus ex-
return for the year you have the gain. You have            tensions, but at a cost less than the              Loss on deposits.     If your loss is a loss on 
the gain in the year you receive insurance pro-            amount you receive for the casualty or             deposits at an insolvent or bankrupt financial in-
ceeds or other reimbursements that result in a             theft. On this amended return, you must re-        stitution, see Loss on Deposits, earlier.
gain.                                                      port the portion of the gain that can’t be 
                                                           postponed and pay any additional tax due.          Lessee’s  loss.     If  you  lease  property  from 
                                                                                                              someone  else,  you  can  deduct  a  loss  on  the 
If  a  partnership  or  a  corporation  owns  the                                                             property in the year your liability for the loss is 
stolen  or  destroyed  property,  only  the  partner-   Three-year limit. The period for assessing tax 
ship or corporation can choose to postpone re-          on any gain ends 3 years after the date you no-       determined. This is true even if the loss occur-
porting the gain.                                       tify the director of the IRS for your area of any of  red or the liability was paid in a different year. 
                                                        the following.                                        You aren’t entitled to a deduction until your lia-
Required  statement. You  should  attach  a             •  You replaced the property.                         bility  under  the  lease  can  be  determined  with 
statement to your return for the year you have          •  You don’t intend to replace the property.          reasonable  accuracy.  Your  liability  can  be  de-
the gain. This statement should include the fol-        •  You didn’t replace the property within the         termined  when  a  claim  for  recovery  is  settled, 
lowing.                                                    replacement period.                                adjudicated, or abandoned. 
• The date and details of the casualty or 
  theft.                                                Changing  your  mind.   You  can  change  your 
• The insurance or other reimbursement you              mind about whether to report or to postpone re-       Disaster Area Losses
  received from the casualty or theft.                  porting your gain at any time before the end of 
• How you figured the gain.                             the replacement period.                               This section discusses the special rules that ap-
                                                                                                              ply to federally declared disaster area losses. It 
Replacement  property  acquired  before                    Example.    Your  property  was  destroyed  in     contains  information  on  when  you  can  deduct 
return filed. If you acquire replacement prop-          2021 due to a federally declared disaster. Your       your loss, how to claim your loss, how to treat 
erty before you file your return for the year you       insurance company reimbursed you $10,000, of          your  home  in  a  disaster  area,  and  what  tax 
have  the  gain,  your  statement  should  also  in-    which  $5,000  was  a  gain.  You  reported  the      deadlines may be postponed. It also lists Fed-
clude  detailed  information  about  all  of  the  fol- $5,000  gain  on  your  return  for  2021  (the  year eral  Emergency  Management  Agency  (FEMA) 
lowing.                                                 you realized the gain) and paid the tax due. In       phone  numbers.  (See Contacting  the  Federal 
• The replacement property.                             2022,  you  bought  replacement  property.  Your      Emergency  Management  Agency  (FEMA), 
• The postponed gain.                                   replacement  property  cost  $9,000.  Because         later.)
• The basis adjustment that reflects the                you reinvested all but $1,000 of your reimburse-
  postponed gain.                                       ment, you can now postpone reporting $4,000           A disaster loss is a loss that occurred in an 
• Any gain you are reporting as income.                 ($5,000 − $1,000) of your gain.                       area determined by the President of the United 
                                                           To  postpone  reporting  your  gain,  file  an     States to warrant assistance by the federal gov-
Replacement property acquired after re-                 amended  return  for  2021  using  Form  1040-X.      ernment  under  the  Stafford  Act  and  that  is  at-
turn filed. If you intend to acquire replacement        You should attach an explanation showing that         tributable to a federally declared disaster. Dis-
property after you file your return for the year in     you previously reported the entire gain from the      aster  areas  include  areas  warranting  public  or 
which you have the gain, your statement should          casualty  but  you  now  want  to  report  only  the  individual  assistance  (or  both).  A  federally  de-
also state that you are choosing to replace the         part of the gain ($1,000) equal to the part of the    clared  disaster  includes  a  major  disaster  or 
property  within  the  required  replacement  pe-       reimbursement not spent for replacement prop-         emergency declaration.
riod.                                                   erty.                                                        A list of the areas warranting public or 
You should then attach another statement to                                                                   TIP    individual  assistance  (or  both)  under 
your return for the year in which you acquire the                                                                    the  Stafford  Act  is  available  at 
replacement  property.  This  statement  should                                                               FEMA.gov/Disasters.
contain detailed information on the replacement         When To Report Gains 
property.                                               and Losses
If you acquire part of your replacement prop-                                                                 FEMA  disaster  declaration  numbers.        If  you 
erty  in  one  year  and  part  in  another  year,  you Gains.   If you receive an insurance or other re-     are reporting a casualty or theft loss attributable 
must  make  a  statement  for  each  year.  The         imbursement  that  is  more  than  your  adjusted     to a federally declared disaster, check the box 
statement  should  contain  detailed  information       basis  in  the  destroyed  or  stolen  property,  you and enter the DR or EM declaration number as-
on  the  replacement  property  acquired  in  that      have a gain from the casualty or theft. You must      signed  by  FEMA  in  the  space  provided  above 
year.                                                   include this gain in your income in the year you      line 1 on your 2022 Form 4684. A list of feder-
                                                        receive the reimbursement, unless you choose          ally declared disasters and FEMA disaster dec-
Substituting  replacement  property.   Once             to postpone  reporting  the  gain,  as  explained     laration  numbers  is  available  at FEMA.gov/
you have acquired qualified replacement prop-           earlier.                                              Disasters.
erty that you designate as replacement property                                                               The FEMA disaster declaration number con-
in a statement attached to your tax return, you                                                               sists  of  the  letters  “DR”  and  four  numbers,  or 
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the  letters  “EM”  and  four  numbers.  For  exam-          Claiming  a  qualifying  disaster  loss  on          1. Enter the amount from Form 4684, line 15, 
ple, enter “DR-4645” for the Tennessee Severe            TIP the previous year’s return may result in               on the dotted line next to line 16 on 
Winter Storm.                                                a lower tax for that year, often produc-               Schedule A and the description, “Net 
                                                         ing or increasing a cash refund.                           Qualified Disaster Loss.”
Disaster  year. The  disaster  year  is  the  tax 
                                                                                                                  2. Also, enter on the dotted line next to 
year in which you sustained the loss attributable        Revoking the election to deduct the loss                   line 16 your standard deduction amount 
to  a  federally  declared  disaster.  Generally,  a     in  the  preceding  year. Complete  Part  II  of           and the description, “Standard Deduction 
disaster loss is sustained in the year the disas-        Section D on the 2021 Form 4684 if you want to             Claimed With Qualified Disaster Loss.”
ter occurred. However, a disaster loss may also          revoke a 2022 disaster year election to deduct 
be sustained in a year after the disaster occur-         a federally declared disaster loss in the preced-        3. Combine these two amounts and enter on 
red. For example, if a claim for reimbursement           ing tax year. Attach the completed Section D to            line 16 of Schedule A and Form 1040 or 
exists for which there is a reasonable prospect          an amended return for the preceding year (that             1040-SR, line 12.
of recovery, no part of the loss for which reim-         is,  to  an  amended  2021  return  for  the  revoca-
bursement may be received is sustained until it          tion of a 2022 disaster year election).                          The  alternative  minimum  tax  adjust-
can  be  ascertained  with  reasonable  certainty        Your  amended  return  revoking  the  election           !       ment  for  the  standard  deduction  is 
whether you will be reimbursed.                          must  be  filed  on  or  before  the  date  that  is  90 CAUTION made  retroactively  inapplicable  to  net 
                                                         days after the due date for making the election          qualified  disaster  losses.  See Taxpayers  who 
When to deduct the loss. You must generally              and on or before the date you file any return or         also file the 2022 Form 6251, Alternative Mini-
deduct  a  casualty  loss  in  the  disaster  year.      amended  return  for  the  year  that  includes  the     mum Tax for Individuals, in the Instructions for 
However, if you have a casualty loss from a fed-         disaster loss.                                           Form 4684 for more information.
erally declared disaster that occurred in an area        Your amended return (revoking the previous 
warranting  public  or  individual  assistance  (or      disaster  loss  election)  should  refigure  your  tax   Main home in disaster area.       If your home is 
both), you can elect to deduct that loss on your         liability as a result of revoking the election. You      located  in  a  federally  declared  disaster  area, 
return or amended return for the tax year imme-          must pay or make arrangements to pay any tax             you  can  postpone  reporting  the  gain  if  you 
diately preceding the disaster year. If you make         and interest due as a result of the revocation.          spend  the  reimbursement  to  repair  or  replace 
this election, the loss is treated as having occur-                                                               your home. Special rules apply to replacement 
red  in  the  preceding  year.  A  list  of  areas  war- Qualified  disaster  losses. A  qualified  disas-        property related to the damage or destruction of 
ranting public or individual assistance (or both)        ter loss is an individual’s casualty or theft loss of    your  main  home  (or  its  contents)  if  located  in 
is available at the FEMA website at FEMA.gov/            personal-use  property  that  is  attributable  to  a    these  areas.  For  more  information,  see Gains 
Disasters.                                               major disaster that was declared by the Presi-           Realized on Homes in Disaster Areas, earlier.
You  must  make  the  election  to  take  your           dent  during  the  period  between  January  1, 
casualty  loss  for  the  disaster  in  the  preceding   2020, and February 25, 2021. Also, this disas-           Home  made  unsafe  by  disaster.    If  your 
year on or before the date that is 6 months after        ter must have an incident period that began on           home is located in a federally declared disaster 
the regular due date for filing your original return     or after December 28, 2019, and on or before             area, your state or local government may order 
(without extensions) for the disaster year. If you       December 27, 2020, and must have ended no                you to tear it down or move it because it is no 
are a calendar year taxpayer, you have until Oc-         later than January 26, 2021. The definition of a         longer safe to live in because of the disaster. If 
tober 16, 2023, to amend your 2021 tax return            qualified  disaster  loss  does  not  extend  to  any    this happens, treat the loss in value as a casu-
to  claim  a  casualty  loss  that  occurred  during     major disaster which has been declared only by           alty loss from a disaster. Your state or local gov-
2022.                                                    reason of COVID-19.                                      ernment  must  issue  the  order  for  you  to  tear 
                                                         A qualified disaster loss also includes an in-           down or move the home within 120 days after 
How  to  deduct  your  loss  in  the  preceding          dividual’s casualty or theft loss of personal-use        the area is declared a disaster area.
year. If  you  have  already  filed  your  return  for   property that is attributable to:                        Figure  your  loss  in  the  same  way  as  for 
the preceding year, you can elect to claim a dis-        •  A major disaster declared by the President            casualty losses of personal-use property. (See 
aster loss against that year’s income by filing an          under section 401 of the Stafford Act in              Figuring a Loss, earlier.) In determining the de-
amended return. Individuals file an amended re-             2016;                                                 crease in FMV, use the value of your home be-
turn  on  Form  1040-X.  (See How  to  report  the       •  Hurricane Harvey;                                     fore you move it or tear it down as its FMV after 
loss on Form 1040-X, later.)                             •  Tropical Storm Harvey;                                the casualty.
To  make  this  election,  complete  Part  I  of         •  Hurricane Irma;
Section D on the 2021 Form 4684 and attach it            •  Hurricane Maria;                                      Unsafe  home.        Your  home  will  be  consid-
to  your  2021  return  or  amended  return  that        •  The California wildfires in 2017 and Janu-            ered unsafe only if both of the following apply.
claims the disaster loss deduction.                         ary 2018; and                                         • Your home is substantially more danger-
You  must  make  an  election  to  deduct  the           •  A major disaster that was declared by the               ous after the disaster than it was before the 
loss in the preceding year on or before the date            President under section 401 of the Stafford             disaster.
that is 6 months after the regular due date for fil-        Act and that occurred in 2018 and before              • The danger is from a substantially in-
ing your original return (without extensions) for           December 21, 2019, and continued no                     creased risk of future destruction from the 
the  disaster  year.  For  individual  calendar  year       later than January 19, 2020 (except those               disaster.
taxpayers,  the  deadline  for  electing  to  take  a       attributable to the California wildfires in 
2022  disaster  loss  on  your  2021  tax  return  is       January 2018 that received prior relief).             Example.     Due to a severe storm, the Presi-
                                                                                                                  dent  declared  the  county  you  live  in  a  federal 
October 16, 2023. See the 2021 Instructions for          See IRS.gov/DisasterTaxRelief for date-                  disaster area. Although your home has only mi-
Form  4684  for  more  detailed  information  on         specific declarations associated with  these  dis-       nor  damage  from  the  storm,  a  month  later  the 
how  to  claim  these  losses  on  your  original  or    asters and for more information.                         county issues a demolition order. This order is 
amended 2021 return.                                                                                              based on a finding that your home is unsafe due 
If you claimed a deduction for a disaster loss           Note. If  you  suffered  a  qualified  disaster          to nearby mud slides caused by the storm. The 
on the tax return for the disaster year and you          loss,  you  are  eligible  to  claim  a  casualty  loss  loss  in  your  home’s  value  because  the  mud 
wish  to  deduct  the  loss  in  the  preceding  year,   deduction and to elect to claim the loss in the          slides  made  it  unsafe  is  treated  as  a  casualty 
you must file an amended return to remove the            preceding tax year.                                      loss from a disaster. The loss in value is the dif-
previously deducted loss on or before the date                                                                    ference between your home’s FMV immediately 
you  file  the  return  or  amended  return  for  the    Increased  standard  deduction  reporting.      If       before  the  disaster  and  immediately  after  the 
preceding  year  that  includes  the  disaster  loss     you have a net qualified disaster loss on Form           disaster.
deduction.                                               4684, line 15, and you aren’t itemizing your de-
                                                         ductions, you can claim an increased standard            Figuring the loss deduction.      When elect-
                                                         deduction  using  Schedule  A  (Form  1040)  by          ing  to  deduct  your  loss  in  the  preceding  year, 
                                                         doing the following.                                     unless  you  have  a qualified  disaster  loss,  dis-
                                                                                                                  cussed  earlier,  you  must  figure  the  loss  under 
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the usual rules for casualty losses, as if it occur- Records. You should keep the records that period of time. See Postponement of Gain, ear-
red in the year preceding the disaster. support your loss deduction. You don’t have to lier, for the rules that apply.
attach them to the amended return.
Example. A hurricane damaged your main Qualified disaster relief payments. Qualified
home and destroyed your furniture in Septem- If your records were destroyed or lost, you disaster relief payments aren’t included in the
ber 2022. This was your only casualty loss for may have to reconstruct them. Information income of individuals to the extent any expen-
the year. Your home is located in a federally de- about reconstructing records is available at ses compensated by these payments aren’t
clared disaster area designated by FEMA in IRS.gov/Newsroom/Reconstructing-Records- otherwise compensated for by insurance or
September 2022 for public or individual assis- After-a-Natural-Disaster-or-Casualty-Loss or other reimbursement. These payments aren’t
tance (or both). The cost of your home and land see Pub. 3067, IRS Disaster Assistance- subject to income tax, self-employment tax, or
was $134,000. The FMV immediately before Federally Declared Disaster Area. employment taxes (social security, Medicare,
the disaster was $147,500 and the FMV imme- and federal unemployment taxes). No withhold-
diately afterward was $100,000. You separately Need a copy of your tax return for the ing applies to these payments.
figured the loss on each item of furniture (see preceding year? It will be easier to prepare Qualified disaster relief payments include
Figuring the Deduction, earlier) and arrived at a Form 1040-X if you have a copy of your tax re- payments you receive (regardless of the
total loss for furniture of $3,000. Your insurance turn for the preceding year. If you had your tax source) for the following expenses.
didn’t cover this type of casualty loss, and you return completed by a tax preparer, he or she Reasonable and necessary personal, fam-
expect no reimbursement for either your home should be able to provide you with a copy of •
ily, living, or funeral expenses incurred as a
or your furniture. your return. If not, you can get a copy by filing result of a federally declared disaster.
You elect to amend your 2021 return to Form 4506 with the IRS. There is a fee for each Reasonable and necessary expenses in-
claim your casualty loss for the disaster. Your return requested. However, if your main home, •
curred for the repair or rehabilitation of a
AGI on your 2021 return was $71,000. Using principal place of business, or tax records are personal residence due to a federally de-
the rules applicable to disaster losses, you fig- located in a federally declared disaster area, clared disaster. (A personal residence can
ure your casualty loss as follows. this fee will be waived. Write the name of the be a rented residence or one you own.)
disaster in the top margin of Form 4506 (for ex- Reasonable and necessary expenses in-
ample, “Tennessee Severe Winter Storm”). •
Furnish- curred for the repair or replacement of the
House ings contents of a personal residence due to a
Other Disaster Issues federally declared disaster.
1. Cost . . . . . . . . . . . . . $134,000 $10,000 Qualified disaster relief payments also in-
Disaster loss to inventory. If your inventory clude amounts paid to individuals affected by
2. FMV before loss qualifies as a casualty loss and is attributa- the disaster by a federal, state, or local govern-
disaster . . . . . . . . . . $147,500 $8,000 ble to a federally declared disaster in an area ment in connection with a federally declared
3. FMV after designated by FEMA for public or individual as- disaster. These payments must be made from a
disaster . . . . . . . . . . 100,000 5,000 sistance (or both), you may elect to deduct the governmental fund, be based on individual or
4. Decrease in FMV loss on your return or amended return for the family needs, and not be compensation for
(line 2 − line 3) . . . . $47,500 $3,000 immediately preceding year. However, de- services. Payments to businesses generally
5. Smaller of line 1 or crease your opening inventory for the year of don’t qualify.
line 4 . . . . . . . . . . . . $47,500 $3,000 the loss so that the loss won’t be reported again
6. Subtract estimated in inventories. Qualified disaster relief payments don’t
insurance . . . . . . . . -0- -0- ! include:
Federal loan canceled. If part of your federal CAUTION
7. Loss after disaster loan was canceled under the Stafford • Payments for expenses otherwise paid for
reimbursement . . . . $47,500 $3,000
Act, it is considered to be reimbursement for the by insurance or other reimbursements; or
8. Total loss . . . . . . . . . . . . . . . . . . $50,500 loss. The cancellation reduces your casualty • Income replacement payments, such as
9. Subtract $100 . . . . . . . . . . . . . . 100 loss deduction. payments of lost wages, lost business in-
come, or unemployment compensation.
10. Loss after $100 rule . . . . . . . . . $50,400 Federal disaster relief grants. Don’t include
11. Subtract 10% of $71,000 post-disaster relief grants received under the
AGI . . . . . . . . . . . . . . . . . . . . . . 7,100
Stafford Act in your income if the grant pay- Qualified disaster mitigation payments.
12. Amount of casualty loss ments are made to help you meet necessary Qualified disaster mitigation payments made
deduction . . . . . . . . . . . . $43,300 expenses or serious needs for medical, dental, under the Stafford Act or the National Flood In-
housing, personal property, transportation, or surance Act (as in effect on April 15, 2005)
How to report the loss on Form 1040-X. You funeral expenses. Don’t deduct casualty losses aren’t included in income. These are payments
should adjust your deductions on Form 1040-X. or medical expenses to the extent they are spe- you, as a property owner, receive to reduce the
The Instructions for Form 1040-X show how to cifically reimbursed by these disaster relief risk of future damage to your property. You
do this. Explain the reasons for your adjustment grants. If the casualty loss was specifically reim- can’t increase your basis in the property, or take
and attach Form 4684 to show how you figured bursed by the grant and you received the grant a deduction or credit, for expenditures made
your loss. See Figuring a Loss, earlier. after the year in which you deducted the casu- with respect to those payments.
If the damaged or destroyed property was alty loss, see Reimbursement Received After
nonbusiness property and you didn’t itemize Deducting Loss, earlier. Unemployment assis- Sale of property under hazard mitigation
your deductions on your original return, you tance payments under the Stafford Act are taxa- program. Generally, if you sell or otherwise
must first determine whether the casualty loss ble unemployment compensation. transfer property, you must recognize any gain
deduction now makes it advantageous for you or loss for tax purposes unless the property is
to itemize. It is advantageous to itemize if the State disaster relief grants for businesses. your main home. You report the gain or deduct
total of the casualty loss deduction and any A grant that a business receives under a state the loss on your tax return for the year you real-
other itemized deductions is more than your program to reimburse businesses for losses in- ize it. (You can’t deduct a loss on personal-use
standard deduction. If you itemize, attach curred for damage or destruction of property property unless the loss resulted from a casu-
Schedule A (Form 1040) or Schedule A (Form because of a disaster isn’t excludable from in- alty, as discussed earlier.) However, if you sell
1040-NR), and Form 4684 to your amended re- come under the general welfare exclusion, as a or otherwise transfer property to the federal
turn. Fill out Form 1040-X to refigure your tax to gift, as a qualified disaster relief payment (ex- government, a state or local government, or an
find your refund. plained next), or as a contribution to capital. Indian tribal government under a hazard mitiga-
However, the business can choose to postpone tion program, you can choose to postpone re-
reporting gain realized from the grant if it buys porting the gain if you buy qualifying replace-
qualifying replacement property within a certain ment property within a certain period of time.

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Table 3. When To Deduct a Casualty or Theft Loss
IF you have a loss...* THEN deduct it in the... How To Report Gains
from a casualty* year the loss occurred. and Losses
in a federally declared disaster area disaster year or the year immediately
before the disaster year. How you report gains and losses depends on
whether the property was business, in-
from a theft year the theft was discovered. come-producing, or personal-use property.
on a deposit treated as a casualty year a reasonable estimate can be made.
Personal-use property. If you have a loss,
* If you are an individual, casualty and theft losses of personal-use property are deductible only if the loss is use both of the following.
attributable to a federally declared disaster. An exception applies where you have personal casualty gains. • Form 4684.
• Schedule A (Form 1040) (or Schedule A
See Postponement of Gain, earlier, for the rules ter area, but whose records necessary to (Form 1040-NR), if you are a nonresident
that apply. meet a postponed tax deadline are located alien).
in the covered disaster area. If you have a gain, report it on both of the fol-
Gains. Special rules apply if you choose to • Any individual visiting the covered disaster lowing.
postpone reporting gain on property damaged area who was killed or injured as a result of Form 4684.
or destroyed in a federally declared disaster the disaster. •
area. For these special rules, see the following • Any other person determined by the IRS to • Schedule D (Form 1040).
discussions. be affected by a federally declared disas- Don’t report on these forms any gain you
• Main home in disaster area, earlier, under ter. postpone. If you choose to postpone gain, see
Replacement Property. How To Postpone a Gain, earlier.
• Business or income-producing property lo- Covered disaster area. This is an area of
cated in a federally declared disaster area, a federally declared disaster in which the IRS Business and income-producing property.
earlier, under Replacement Property. has decided to postpone tax deadlines for up to Use Form 4684 to report your gains and losses.
1 year. You will also have to report the gains and los-
ses on other forms, as explained next.
Postponed Tax Deadlines Mandatory 60-day postponement. Certain
taxpayers affected by a federally declared dis- Property held 1 year or less. Individuals
The IRS may postpone for up to 1 year certain aster that occurs after December 20, 2019, may report losses from income-producing property
tax deadlines of taxpayers who are affected by be eligible for a mandatory 60-day postpone- on Schedule A (Form 1040). Gains from busi-
a federally declared disaster. The tax deadlines ment for certain tax deadlines such as filing or ness and income-producing property are com-
the IRS may postpone include those for filing in- paying income, excise, and employment taxes; bined with losses from business property and
come, excise, and employment tax returns; and making contributions to a traditional IRA or the net gain or loss is reported on Form 4797. If
paying income, excise, and employment taxes; Roth IRA. you aren’t otherwise required to file Form 4797,
and making contributions to a traditional IRA or The period beginning on the earliest incident only enter the net gain or loss on your tax return
Roth IRA. date specified in the disaster declaration and on the line identified as from Form 4797 (for in-
If any tax deadline is postponed, the IRS will ending on the date that is 60 days after either dividuals filing Form 1040 or 1040-SR, this
publicize the postponement in your area and the earliest incident date or the date of the dec- would be Schedule 1 (Form 1040), line 4). Next
publish a news release and, where necessary, laration, whichever is later, is the period during to that line, enter “Form 4684.” Partnerships
in a revenue ruling, revenue procedure, notice, which the deadlines are postponed. and S corporations should see the Instructions
announcement, or other guidance in the Internal For information about disaster relief availa- for Form 4684 to find out where to report these
Revenue Bulletin (IRB). Go to IRS.gov/ ble in your area, including postponements, go gains and losses.
DisasterTaxRelief to find out if a tax deadline to IRS News Around the Nation. Property held more than 1 year. If your
has been postponed for your area. losses from business and income-producing
Abatement of interest and penalties. The property are more than gains from these types
Who is eligible. If the IRS postpones a tax IRS may abate the interest and penalties on un- of property, combine your losses from business
deadline, the following taxpayers are eligible for derpaid income tax for the length of any post- property with total gains from business and in-
the postponement. ponement of tax deadlines. come-producing property. Report the net gain
• Any individual whose main home is located or loss as an ordinary gain or loss on Form
in a covered disaster area (defined later). Contacting the Federal 4797. If you aren’t otherwise required to file
• Any business entity or sole proprietor Form 4797, only enter the net gain or loss on
whose principal place of business is loca- Emergency Management your tax return on the line identified as from
ted in a covered disaster area. Agency (FEMA) Form 4797 (for individuals filing Form 1040 or
• Any individual who is a relief worker affili- 1040-SR, this would be Schedule 1 (Form
ated with a recognized government or phil- You can get information from FEMA by visiting 1040), line 4). Next to that line, enter “Form
anthropic organization and who is assisting DisasterAssistance.gov, or calling the following 4684.” Individuals deduct any loss of in-
in a covered disaster area. phone numbers. These numbers are only acti- come-producing property on Schedule A (Form
• Any individual, business entity, or sole pro- vated after a federally declared disaster. 1040). Partnerships and S corporations should
prietorship whose records are needed to • 800-621-3362. see Form 4684 to find out where to report these
meet a postponed tax deadline, provided • Dial 711 and provide the TRS operator the gains and losses.
those records are maintained in a covered number 800-621-3362 if you are deaf, hard If losses from business and income-produc-
disaster area. The main home or principal of hearing, or have a speech disability. ing property are less than or equal to gains from
place of business doesn’t have to be loca- these types of property, report the net amount
ted in the covered disaster area. on Form 4797. You may also have to report the
• Any estate or trust that has tax records gain on Schedule D (Form 1040) depending on
necessary to meet a postponed tax dead- whether you have other transactions. Partner-
line, provided those records are main- ships and S corporations should see Form 4684
tained in a covered disaster area. to find out where to report these gains and los-
• The spouse on a joint return with a tax- ses.
payer who is eligible for postponements.
• Any individual, business entity, or sole pro- Depreciable property. If the damaged or
prietorship not located in a covered disas- stolen property was depreciable property held

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more than 1 year, you may have to treat all or free online federal tax preparation, e-filing, • You may also be able to access tax law in-
part of the gain as ordinary income to the extent and direct deposit or payment options. formation in your electronic filing software.
of depreciation allowed or allowable. You figure • VITA. The Volunteer Income Tax Assis-
the ordinary income part of the gain in Part III of tance (VITA) program offers free tax help
Form 4797. See Depreciation Recapture in to people with low-to-moderate incomes, Need someone to prepare your tax return?
chapter 3 of Pub. 544 for more information persons with disabilities, and limited-Eng- There are various types of tax return preparers,
about the recapture rule. lish-speaking taxpayers who need help including enrolled agents, certified public ac-
preparing their own tax returns. Go to countants (CPAs), accountants, and many oth-
IRS.gov/VITA, download the free IRS2Go ers who don’t have professional credentials. If
Adjustments to Basis app, or call 800-906-9887 for information you choose to have someone prepare your tax
on free tax return preparation. return, choose that preparer wisely. A paid tax
If you have a casualty or theft loss, you must • TCE. The Tax Counseling for the Elderly preparer is:
decrease your basis in the property by any in- (TCE) program offers free tax help for all • Primarily responsible for the overall sub-
surance or other reimbursement you receive taxpayers, particularly those who are 60 stantive accuracy of your return,
and by any deductible loss. The result is your years of age and older. TCE volunteers • Required to sign the return, and
adjusted basis in the property. specialize in answering questions about • Required to include their preparer tax iden-
pensions and retirement-related issues tification number (PTIN).
If you make either of the basis adjustments unique to seniors. Go to IRS.gov/TCE,
described above, amounts you spend on re- download the free IRS2Go app, or call Although the tax preparer always signs the
pairs that restore the property to its pre-casualty 888-227-7669 for information on free tax return, you're ultimately responsible for provid-
condition increase your adjusted basis. Don’t return preparation. ing all the information required for the preparer
increase your basis in the property by any quali- • MilTax. Members of the U.S. Armed to accurately prepare your return. Anyone paid
fied disaster mitigation payments (discussed Forces and qualified veterans may use Mil- to prepare tax returns for others should have a
earlier under Disaster Area Losses). See Adjus- Tax, a free tax service offered by the De- thorough understanding of tax matters. For
ted Basis in Pub. 551 for more information on partment of Defense through Military One- more information on how to choose a tax pre-
adjustments to basis. Source. For more information, go to parer, go to Tips for Choosing a Tax Preparer
MilitaryOneSource MilitaryOneSource.mil/ ( on IRS.gov.
If Deductions Are More Than MilTax).
Also, the IRS offers Free Fillable Coronavirus. Go to IRS.gov/Coronavirus for
Income Forms, which can be completed online and links to information on the impact of the corona-
then filed electronically regardless of in- virus, as well as tax relief available for individu-
If your casualty or theft loss deduction causes come. als and families, small and large businesses,
your deductions for the year to be more than and tax-exempt organizations.
your income for the year, you may have a net Using online tools to help prepare your re-
operating loss (NOL). You don’t have to be in turn. Go to IRS.gov/Tools for the following. Employers can register to use Business
business to have an NOL from a casualty or • The Earned Income Tax Credit Assistant Services Online. The Social Security Adminis-
theft loss. For more information, see Pub. 536, (IRS.gov/EITCAssistant) determines if tration (SSA) offers online service at SSA.gov/
Net Operating Losses (NOLs) for Individuals, you’re eligible for the earned income credit employer for fast, free, and secure online W-2
Estates, and Trusts. (EIC). filing options to CPAs, accountants, enrolled
• The Online EIN Application IRS.gov/EIN ( ) agents, and individuals who process Form W-2,
helps you get an employer identification Wage and Tax Statement, and Form W-2c,
How To Get Tax Help number (EIN) at no cost. Corrected Wage and Tax Statement.
• The Tax Withholding Estimator IRS.gov/ (
If you have questions about a tax issue; need W4app) makes it easier for you to estimate IRS social media. Go to IRS.gov/SocialMedia
help preparing your tax return; or want to down- the federal income tax you want your em- to see the various social media tools the IRS
load free publications, forms, or instructions, go ployer to withhold from your paycheck. uses to share the latest information on tax
to IRS.gov to find resources that can help you This is tax withholding. See how your with- changes, scam alerts, initiatives, products, and
right away. holding affects your refund, take-home services. At the IRS, privacy and security are
pay, or tax due. our highest priority. We use these tools to share
public information with you. Don’t post your so-
Preparing and filing your tax return. After • The First-Time Homebuyer Credit Account cial security number (SSN) or other confidential
receiving all your wage and earnings state- Look-up IRS.gov/HomeBuyer ( ) tool pro- information on social media sites. Always pro-
ments (Forms W-2, W-2G, 1099-R, 1099-MISC, vides information on your repayments and tect your identity when using any social net-
1099-NEC, etc.); unemployment compensation account balance. working site.
statements (by mail or in a digital format) or • The Sales Tax Deduction Calculator The following IRS YouTube channels pro-
other government payment statements (Form (IRS.gov/SalesTax) figures the amount you vide short, informative videos on various tax-re-
1099-G); and interest, dividend, and retirement can claim if you itemize deductions on lated topics in English, Spanish, and ASL.
statements from banks and investment firms Schedule A (Form 1040). • Youtube.com/irsvideos.
(Forms 1099), you have several options to
choose from to prepare and file your tax return. Getting answers to your tax ques- • Youtube.com/irsvideosmultilingua.
You can prepare the tax return yourself, see if tions. On IRS.gov, you can get • Youtube.com/irsvideosASL.
you qualify for free tax preparation, or hire a tax up-to-date information on current
professional to prepare your return. events and changes in tax law. Watching IRS videos. The IRS Video portal
(IRSVideos.gov) contains video and audio pre-
Free options for tax preparation. Go to • IRS.gov/Help: A variety of tools to help you sentations for individuals, small businesses,
get answers to some of the most common and tax professionals.
IRS.gov to see your options for preparing and tax questions.
filing your return online or in your local commun- IRS.gov/ITA: The Interactive Tax Assistant, Online tax information in other languages.
ity, if you qualify, which include the following. •
a tool that will ask you questions and, You can find information on IRS.gov/
• Free File. This program lets you prepare based on your input, provide answers on a MyLanguage if English isn’t your native lan-
and file your federal individual income tax number of tax law topics. guage.
return for free using brand-name tax-prep- • IRS.gov/Forms: Find forms, instructions,
aration-and-filing software or Free File filla- and publications. You will find details on Free Over-the-Phone Interpreter (OPI) Serv-
ble forms. However, state tax preparation the most recent tax changes and interac- ice. The IRS is committed to serving our multi-
may not be available through Free File. Go tive links to help you find answers to your lingual customers by offering OPI services. The
to IRS.gov/FreeFile to see if you qualify for questions. OPI Service is a federally funded program and
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is available at Taxpayer Assistance Centers Tax Pro Account. This tool lets your tax pro- Making a tax payment. Go to IRS.gov/
(TACs), other IRS offices, and every VITA/TCE fessional submit an authorization request to ac- Payments for information on how to make a
return site. The OPI Service is accessible in cess your individual taxpayer IRS online payment using any of the following options.
more than 350 languages. account. For more information, go to IRS.gov/ • IRS Direct Pay: Pay your individual tax bill
TaxProAccount. or estimated tax payment directly from
Accessibility Helpline available for taxpay- your checking or savings account at no
ers with disabilities. Taxpayers who need in- Using direct deposit. The fastest way to re- cost to you.
formation about accessibility services can call ceive a tax refund is to file electronically and • Debit or Credit Card: Choose an approved
833-690-0598. The Accessibility Helpline can choose direct deposit, which securely and elec- payment processor to pay online or by
answer questions related to current and future tronically transfers your refund directly into your phone.
accessibility products and services available in financial account. Direct deposit also avoids the • Electronic Funds Withdrawal: Schedule a
alternative media formats (for example, braille, possibility that your check could be lost, stolen, payment when filing your federal taxes us-
large print, audio, etc.). The Accessibility Help- destroyed, or returned undeliverable to the IRS. ing tax return preparation software or
line does not have access to your IRS account. Eight in 10 taxpayers use direct deposit to re- through a tax professional.
For help with tax law, refunds, or account-rela- ceive their refunds. If you don’t have a bank ac- • Electronic Federal Tax Payment System:
ted issues, go to IRS.gov/LetUsHelp. count, go to IRS.gov/DirectDeposit for more in- Best option for businesses. Enrollment is
formation on where to find a bank or credit required.
Note. Form 9000, Alternative Media Prefer- union that can open an account online. • Check or Money Order: Mail your payment
ence, or Form 9000(SP) allows you to elect to to the address listed on the notice or in-
receive certain types of written correspondence Getting a transcript of your return. The structions.
in the following formats. quickest way to get a copy of your tax transcript • Cash: You may be able to pay your taxes
• Standard Print. is to go to IRS.gov/Transcripts. Click on either with cash at a participating retail store.
• Large Print. “Get Transcript Online” or “Get Transcript by • Same-Day Wire: You may be able to do
Mail” to order a free copy of your transcript. If same-day wire from your financial institu-
• Braille. you prefer, you can order your transcript by call- tion. Contact your financial institution for
• Audio (MP3). ing 800-908-9946. availability, cost, and time frames.
• Plain Text File (TXT). Reporting and resolving your tax-related Note. The IRS uses the latest encryption
• Braille Ready File (BRF). identity theft issues. technology to ensure that the electronic pay-
• Tax-related identity theft happens when ments you make online, by phone, or from a
Disasters. Go to Disaster Assistance and someone steals your personal information mobile device using the IRS2Go app are safe
Emergency Relief for Individuals and to commit tax fraud. Your taxes can be af- and secure. Paying electronically is quick, easy,
Businesses to review the available disaster tax fected if your SSN is used to file a fraudu- and faster than mailing in a check or money or-
relief. lent return or to claim a refund or credit. der.
• The IRS doesn’t initiate contact with tax-
Getting tax forms and publications. Go to payers by email, text messages (including What if I can’t pay now? Go to IRS.gov/
IRS.gov/Forms to view, download, or print all shortened links), telephone calls, or social Payments for more information about your op-
the forms, instructions, and publications you media channels to request or verify per- tions.
may need. Or, you can go to IRS.gov/ sonal or financial information. This in- • Apply for an online payment agreement
OrderForms to place an order. cludes requests for personal identification (IRS.gov/OPA) to meet your tax obligation
numbers (PINs), passwords, or similar in- in monthly installments if you can’t pay
Getting tax publications and instructions in formation for credit cards, banks, or other your taxes in full today. Once you complete
eBook format. You can also download and financial accounts. the online process, you will receive imme-
view popular tax publications and instructions • Go to IRS.gov/IdentityTheft, the IRS Iden- diate notification of whether your agree-
(including the Instructions for Form 1040) on tity Theft Central webpage, for information ment has been approved.
mobile devices as eBooks at IRS.gov/eBooks. on identity theft and data security protec- • Use the Offer in Compromise Pre-Qualifier
tion for taxpayers, tax professionals, and to see if you can settle your tax debt for
Note. IRS eBooks have been tested using businesses. If your SSN has been lost or less than the full amount you owe. For
Apple's iBooks for iPad. Our eBooks haven’t stolen or you suspect you’re a victim of more information on the Offer in Compro-
been tested on other dedicated eBook readers, tax-related identity theft, you can learn mise program, go to IRS.gov/OIC.
and eBook functionality may not operate as in- what steps you should take.
tended. Get an Identity Protection PIN (IP PIN). IP Filing an amended return. Go to IRS.gov/
•
Access your online account (individual tax- PINs are six-digit numbers assigned to tax- Form1040X for information and updates.
payers only). Go to IRS.gov/Account to se- payers to help prevent the misuse of their
curely access information about your federal tax SSNs on fraudulent federal income tax re- Checking the status of your amended re-
account. turns. When you have an IP PIN, it pre- turn. Go to IRS.gov/WMAR to track the status
• View the amount you owe and a break- vents someone else from filing a tax return of Form 1040-X amended returns.
down by tax year. with your SSN. To learn more, go to Note. It can take up to 3 weeks from the
• See payment plan details or apply for a IRS.gov/IPPIN. date you filed your amended return for it to
new payment plan. Ways to check on the status of your refund. show up in our system, and processing it can
• Make a payment or view 5 years of pay- Go to IRS.gov/Refunds. take up to 16 weeks.
ment history and any pending or sched- •
uled payments. • Download the official IRS2Go app to your Understanding an IRS notice or letter
mobile device to check your refund status. you’ve received. Go to IRS.gov/Notices to
data from your most recent tax return, and •
• Access your tax records, including key Call the automated refund hotline at find additional information about responding to
800-829-1954.
transcripts. an IRS notice or letter.
• View digital copies of select notices from Note. The IRS can’t issue refunds before Note. You can use Schedule LEP (Form
the IRS. mid-February for returns that claimed the EIC or 1040), Request for Change in Language Prefer-
• Approve or reject authorization requests the additional child tax credit (ACTC). This ap- ence, to state a preference to receive notices,
from tax professionals. plies to the entire refund, not just the portion as- letters, or other written communications from
• View your address on file or manage your sociated with these credits. the IRS in an alternative language. You may not
communication preferences.
immediately receive written communications in

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the requested language. The IRS’s commitment            How Can You Learn About Your                              How Else Does TAS Help 
to LEP taxpayers is part of a multi-year timeline       Taxpayer Rights?                                          Taxpayers?
that is scheduled to begin providing translations 
in 2023. You will continue to receive communi-          The Taxpayer Bill of Rights describes 10 basic            TAS works to resolve large-scale problems that 
cations, including notices and letters in English       rights that all taxpayers have when dealing with          affect  many  taxpayers.  If  you  know  of  one  of 
until  they  are  translated  to  your  preferred  lan- the  IRS.  Go  to TaxpayerAdvocate.IRS.gov  to            these broad issues, report it to them at IRS.gov/
guage.                                                  help you understand what these rights mean to             SAMS.
                                                        you and how they apply. These are your rights. 
Contacting  your  local  IRS  office. Keep  in          Know them. Use them.                                      TAS for Tax Professionals
mind,  many  questions  can  be  answered  on 
IRS.gov  without  visiting  an  IRS  TAC.  Go  to                                                                 TAS can provide a variety of information for tax 
IRS.gov/LetUsHelp  for  the  topics  people  ask        What Can TAS Do for You?
                                                                                                                  professionals,  including  tax  law  updates  and 
about  most.  If  you  still  need  help,  IRS  TACs                                                              guidance, TAS programs, and ways to let TAS 
provide tax help when a tax issue can’t be han-         TAS  can  help  you  resolve  problems  that  you         know about systemic problems you’ve seen in 
dled online or by phone. All TACs now provide           can’t resolve with the IRS. And their service is          your practice.
service  by  appointment,  so  you’ll  know  in  ad-    free. If you qualify for their assistance, you will 
vance  that  you  can  get  the  service  you  need     be assigned to one advocate who will work with 
without long wait times. Before you visit, go to        you  throughout  the  process  and  will  do  every-      Low Income Taxpayer 
IRS.gov/TACLocator  to  find  the  nearest  TAC         thing  possible  to  resolve  your  issue.  TAS  can      Clinics (LITCs)
and to check hours, available services, and ap-         help you if:
pointment options. Or, on the IRS2Go app, un-             •  Your problem is causing financial difficulty         LITCs  are  independent  from  the  IRS.  LITCs 
der  the  Stay  Connected  tab,  choose  the  Con-           for you, your family, or your business;              represent individuals whose income is below a 
tact Us option and click on “Local Offices.”              •  You face (or your business is facing) an             certain level and need to resolve tax problems 
                                                             immediate threat of adverse action; or               with the IRS, such as audits, appeals, and tax 
The Taxpayer Advocate                                     •  You’ve tried repeatedly to contact the IRS           collection disputes. In addition, LITCs can pro-
                                                             but no one has responded, or the IRS                 vide  information  about  taxpayer  rights  and  re-
Service (TAS) Is Here To                                     hasn’t responded by the date promised.               sponsibilities in different languages for individu-
Help You                                                                                                          als who  speak English as a second  language. 
What Is TAS?                                            How Can You Reach TAS?                                    Services are offered for free or a small fee for 
                                                                                                                  eligible taxpayers. To find an LITC near you, go 
TAS is an independent organization within the           TAS  has  offices in  every  state,  the  District  of    to  TaxpayerAdvocate.IRS.gov/about-us/Low-
IRS that helps taxpayers and protects taxpayer          Columbia,  and  Puerto  Rico.  Your  local  advo-         Income-Taxpayer-Clinics-LITC or see IRS Pub. 
rights. Their job is to ensure that every taxpayer      cate’s  number  is  in  your  local  directory  and  at   4134, Low Income Taxpayer Clinic List.
is  treated  fairly  and  that  you  know  and  under-  TaxpayerAdvocate.IRS.gov/Contact-Us.         You 
stand  your  rights  under  the Taxpayer  Bill  of      can also call them at 877-777-4778.
Rights.

                       To help us develop a more useful index, please let us know if you have ideas for index entries.
Index                  See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
 
                                      Nondeductible losses          3          Federally declared disaster            13,       Measuring decrease in   6
A                                     Progressive deterioration       3             15                                          Items not to consider      7
Abatement of interest and             Proof of          5                      Figuring loss deduction             16           Items to consider    6
  penalties  18                       When to report         15                Form 1040-X      17                         Federal casualty loss     3
Accidents  3                          Workbooks for listing property      2    Home made unsafe                 16         Federal disaster relief grants    17
Adjusted basis  7               Clean up costs               6                 How to deduct loss in preceding             Federal Emergency Management 
Adjustments to basis   14 19,   Condemnation                 2                      year   16                                   Agency (FEMA), 
Amended returns   15            Corrosive drywall              3               Inventory   17                                   contacting 18
Appraisals 6 7,                 Costs:                                         Main home rules        14 18,               Federally declared disaster:
Assistance (See Tax help)             Appraisals          7                    Qualified disaster mitigation                    Disaster loss 3
                                      Clean up            6                         payments  17                                Federal casualty loss 3
B                                     Incidental expenses           7          Qualified disaster relief                        Qualified disaster loss 3
                                                                                    payments  17                           Federally declared disasters      2, 
                                      Landscaping            6                 Records to keep        17                        13 15, 
Bad debts  5                          Photographs taken after loss        7    Tax deadlines postponed               18    Figuring gain   12
Basis:                                Protection          7                    When to deduct         16                   Figuring loss   5 11, 
  Adjusted   7                        Repair            6                           Table 3 18                                  Adjusted basis 7
  Adjustments to 14 19,               Replacement            7               Disaster loss    3                                 Disaster area losses 16
  Replacement property   14
                                                                             Disaster mitigation payments               17      Insurance and other 
Business or income-producing    D                                            Disaster relief grants             8               reimbursements      8
  property   5
Business purposes, property     Death of taxpayer:                           Drywall, corrosive       3                    Form 1040-X:
  used partly for 12                  Postponement of gain          13       Due dates:                                         Disaster area losses 17
                                Deductible losses              3               Tax deadlines postponed               18    Form 1040, Schedule A        18
C                               Deduction limits             9                                                             Form 1040, Schedule D        18
Cars:                                 $100 rule           10                 E                                             Form 4684:
  Accidents  3                        10% rule            10                 Employer’s emergency disaster                      Reporting gains and losses on 
  Fair market value of 6              Personal-use property                    fund 8                                           personal-use property      18
                                             (Table 2)      9
Cash gifts 8                    Deposit losses               4 18,           F                                             G
Casualty losses 18                    Reporting of (Table 1)        5                                                      Gains:
  Deductible losses 3                 When to report         15              Fair market value (FMV):
  Definition 2                  Disaster area losses               15          Decline in value of property in or               Figuring 12
  Deposits, loss on 5                 Federal loan canceled           17            near casualty area          7               Postponement of  13 15, 

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  Reimbursements    5             Mislaid or lost property 4                                              Deductions exceeding 
  Reporting of 18                 Missing children, photographs      Q                                    income      19
  When to report  15                of 2                                                                  Deposits  5
                                                                     Qualified disaster loss   3          Table 1     5
I                                 N                                                                       Disaster area losses 17
                                                                     R
Incidental expenses  7            Nonbusiness bad debts      5                                            Personal-use property    18
Insurance  8                      Nondeductible losses     3         Records of loss   5                  Timing of  15
                                                                     Recovered stolen property     6
  Living expenses, payments for 8                                    Reimbursements:                     S
Interest abatement  18            P                                    Cash gifts 8                      Sentimental value  7
Inventory losses  5               Payments for living expenses    8    Disaster relief 8                 State disaster relief grants for 
  Disaster area losses 17         Penalty abatement  18                Employer’s emergency disaster      businesses    17
                                  Personal property:                   fund     8                        Stolen property (See Theft losses)
L                                   Loss deduction, figuring of 11     Failure to file a claim 8
Landscaping  6                    Personal-use property:               Received after deducting loss 9   T
Leased property   5                 Deduction limits (Table 2) 9       Types of 8
  When to report  15                Reporting gains and losses    18 Related expenses    7               Tables and figures:
Losses:                           Personal-use real property    5    Related person, replacement          Deduction limit rules for 
  Casualty (See Casualty losses)  Photographs:                         property bought from      13       personal-use property 
  Deposits (See Deposit losses)     Documentation of loss    7       Repair costs 6                       (Table 2)     9
  Disaster areas (See Disaster    Ponzi-type investment              Replacement cost    7                Reporting loss on deposits 
  area losses)                      schemes   4                      Replacement period    14             (Table 1)     5
  Figuring amount (See Figuring   Postponed tax deadlines    18        Extension of 14                    When to deduct losses 
                                                                                                          (Table 3)     18
  loss)                           Postponement of gain     13 15,    Replacement property      13        Tax help 19
  Proof of 5                        Amended return   15                Advance payment   13              Theft losses 4
  Records of 5                      Changing mind    15                Basis adjustment to corporation’s  FMV of stolen property    6
  Reporting of 18                   Replacement property acquired      property    14
  Theft (See Theft losses)             after return filed 15           Basis of 14                        Mislaid or lost property  4
  When to report  15                Replacement property acquired      Main home  14                      Proof of 5
  Table 3    18                        before return filed 15          In disaster area    16             When to deduct (Table 3)   18
                                    Required statement    15           Postponement of gain     15        When to report  15
M                                   Substituting replacement         Reporting gains and losses    13,    Workbooks for listing property  2
                                       property 15                     18                                Timber loss  13
Mandatory 60-day                    Three-year limit 15                Basis, adjustments to   19
  postponement     18             Proof of loss 5                      Business and income-producing     W
Married taxpayers:                Protection costs 7                   property    18                    Workbooks for property lost due 
  Deduction limits 10             Publications (See Tax help)                                             to casualties and thefts   2

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