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Rev. date: 09/2006


Casualty and Theft Losses

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Tele-Tax Topic 507
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Generally you may deduct casualty and theft losses to your home, household items and vehicles on your Federal income tax return. You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement and you must reduce the loss by the amount of the reimbursement.
A casualty does not include normal wear and tear or progressive deterioration from age or termite damage. The damage must be caused by a sudden, unexpected, and unusual event (e.g., car accident, fire, earthquake, flood, vandalism). For the definition of "sudden, unexpected, and unusual" and for more information on the types of losses that are generally deductible as casualty losses, see Publication 547, Casualties, Disasters, and Thefts.
A theft is the taking and removing of property or money with the intent to deprive the owner of it. Lost or mislaid property is not considered a theft.
If your property is not completely destroyed, or if it is personal-use property, the amount of your casualty or theft loss is the lesser of the adjusted basis of your property, or the decrease in fair market value of your property as a result of the casualty or theft, reduced by any insurance or other reimbursement you receive or expect to receive.
If business or income–producing property, such as rental property, is completely destroyed, the amount of your loss is your adjusted basis in the property minus any salvage value, and minus any insurance or other reimbursement you receive or expect to receive.
For more information about how to calculate your loss deduction, refer to Tax Topic 515.
If you believe that your loss qualifies as a casualty or theft loss, refer to Publication 547, Casualties, Disasters, and Thefts. For losses involving personal-use property, refer to Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property). For losses involving business-use property, refer to Publication 584-B, Business Casualty, Disaster and Theft Loss Workbook.
To claim a casualty or theft loss, you must complete Form 4684, Casualties and Thefts, and attach it to your return. Generally, you may claim casualty or theft loss of personal use property only if you itemize deductions on Form 1040, Schedule A. However, if you have a casualty loss from a disaster that occurred in an area declared by the President to be a federal disaster area, refer to Tax Topic 515.