Not Every Disaster Allows for a Casualty Loss Tax Deduction

Car driving in rain and flood.

Many Americans have become victims of natural disasters in 2024. Wherever you live, unexpected disasters may cause damage to your home or personal property, creating a “personal casualty loss.” This is defined as damage from a sudden, unexpected or unusual event, such as a hurricane, tornado, flood, earthquake, fire, act of vandalism or terrorist attack. You can deduct personal casualty losses only if you itemize on your tax return and, through 2025, only if the loss results from a federally declared disaster. There is, however, an exception to the latter rule. Suppose you have personal casualty gains because your insurance proceeds exceed the tax basis of the damaged or destroyed property. In that case, you can deduct personal casualty losses that aren’t due to a federally declared disaster up to the amount of your personal casualty gains.

In some cases taxpayers can deduct a casualty loss on the tax return for the preceding year and claim a refund. You may be able to file an amended return if you’ve already filed the relevant return.

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Recovering Lost Documents and Receiving Tax Relief After a Natural Disaster

A moody photo showing raindrops on a car window, creating a soft focus effect on the blurred traffic outside. The overcast sky and wet conditions add a sense of melancholy and reflection, capturing a quiet moment in the hustle of everyday life.

It’s common for individual and business taxpayers to lose financial records during a natural disaster. Unfortunately, you usually need such records to document losses for your insurance company and to qualify for federal assistance, so it’s important to think about recovering lost documents if this ever happens to you.

If you visit the IRS website (https://www.irs.gov/individuals/get-transcript), you can view or obtain copies of your historical tax returns, wage and income statements, and other tax account information.

Requesting online access to your records is the fastest method, but even physical transcripts can be expected to arrive in the mail within 10 calendar days. Call your bank, credit card issuers and other financial service providers for copies of other needed documents.

If you were the victim of a natural disaster this year, you also may be eligible for filing extensions and other tax relief. Visit the IRS website for more information: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

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