Publication 547: Casualties Disasters And Theft

Publication 547, a resource from the IRS, explains how to claim deductions for losses incurred due to casualties, disasters, and thefts on your tax return. This guide defines these terms, helps calculate your loss, and clarifies the deduction limits and reporting requirements.

What is Publication 547?

Publication 547, formally titled "Casualties, Disasters, and Thefts," is a free resource offered by the Internal Revenue Service (IRS) to help taxpayers understand the tax implications of unexpected losses. This guide outlines the rules for claiming deductions on your federal tax return for:

A. Casualties: Damage or destruction of your property due to sudden, unexpected events like fire, theft, vandalism, storms, or accidents.

B. Disasters: Losses attributable to federally declared disasters like hurricanes, floods, or earthquakes.

C. Thefts: Stolen property, including cash and valuables.

Key Points To Remember About Publication 547

A. Deduction Eligibility: For tax years 2018-2025, personal casualty and theft losses are generally deductible only if:

  1. They occur in a federally declared disaster area.
  2. They exceed $100 per event and 10% of your adjusted gross income (AGI).
  3. Exception: If you have personal casualty gains in the same year, all casualty and theft losses become deductible, regardless of location.

B. Qualified Disaster Losses: Losses in federally declared disaster areas may qualify for special treatment, including:

  1. Increased standard deduction: $500 instead of $100 per event.
  2. Waived 10% AGI limitation.

C. Calculating Your Loss: Determine the fair market value of your property before and after the event, then subtract the latter from the former. Include repair or replacement costs if exceeding the decrease in value.

D. Insurance and Reimbursements: Reduce your loss by any insurance or other reimbursements received.

E. Recordkeeping: Maintain detailed records documenting the event, loss, repairs, and reimbursements.

F. Filing: Report your losses on Form 4684, Casualties and Thefts, and attach it to your tax return.