8713 / How is the amount of a taxpayer’s allowable casualty or theft loss deduction determined?
Editor’s Note: Under the 2017 tax reform legislation, individuals are no longer entitled to deduct casualty and theft loss expenses as itemized deductions for 2018-2025 (when those losses are not related to property used in a trade or business). An exception exists for losses that occur in federally declared disaster areas.1
If a taxpayer has suffered a casualty (or theft) loss, regardless of whether the loss is personal in nature or is related to trade or business activities, the taxpayer may be entitled to deduct the lesser of the following amounts:
(1) The fair market value immediately before the casualty minus the fair market value of the property immediately after the casualty; or
(2) The adjusted basis of the property that would be used for determining the taxpayer’s gain or loss if the property was sold or otherwise disposed of.2