If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone reporting the gain as explained in Publication 547.
If you have a loss, see Table 25-2
Table 25-2. When To Deduct a Loss
| IF you have a loss... || THEN deduct it in the year... |
|from a casualty,||the loss occurred.|
|in a federally declared disaster area,||the disaster occurred or the year immediately before the disaster.|
|from a theft,|| the theft was discovered.|
|on a deposit treated as a:|| |
| • casualty,|| • a reasonable estimate can be made.|
| • bad debt,|| • deposits are totally worthless.|
| • ordinary loss,|| • a reasonable estimate can be made.|
Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. This is true even if you do not repair or replace the damaged property until a later year.
You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen.
If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed.taxmap/pub17/p17-143.htm#en_us_publink1000173645
If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits
You generally must deduct a casualty loss in the year it occurred. However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct the loss on your tax return or amended return for either of the following years.
- The year the disaster occurred.
- The year immediately preceding the year the disaster occurred.
Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. For those special rules, see Publication 547.taxmap/pub17/p17-143.htm#en_us_publink1000173649
The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA.
If any tax deadline is postponed, the IRS will publicize the postponement in your area by publishing a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). taxmap/pub17/p17-143.htm#en_us_publink1000173650
If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement.
- Any individual whose main home is located in a covered disaster area (defined next).
- Any business entity or sole proprietor whose principal place of business is located in a covered disaster area.
- Any individual who is a relief worker affiliated with a recognized government or philanthropic organization who is assisting in a covered disaster area.
- Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. The main home or principal place of business does not have to be located in the covered disaster area.
- Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area.
- The spouse on a joint return with a taxpayer who is eligible for postponements.
- Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area.
- Any individual visiting the covered disaster area who was killed or injured as a result of the disaster.
- Any other person determined by the IRS to be affected by a federally declared disaster.
This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. taxmap/pub17/p17-143.htm#en_us_publink1000173652
The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. taxmap/pub17/p17-143.htm#en_us_publink1000173653
For more information, see Disaster Area Losses in Publication 547.