Updated August 3, 2026. Quick answer: since 2018 you can only deduct a personal casualty loss if it came from a federally declared disaster. A burst pipe, a house fire, a tree through the roof on an ordinary day — none of it is deductible. And the rule that was written to expire at the end of 2025 no longer expires.
The rule
In the case of an individual, except as provided in subparagraph (B), any personal casualty loss which (but for this paragraph) would be deductible in a taxable year beginning after December 31, 2017, shall be allowed as a deduction under subsection (a) only to the extent it is attributable to a Federally declared disaster (as defined in subsection (i)(5)) or a State declared disaster.
— 26 U.S.C. 165(h)(5)(A), as amended by Pub. L. 119-21 sec. 70109(a)(1),(c) (July 4, 2025)
The correction: it did not sunset
As originally enacted this limitation applied to tax years beginning after 2017 and before 1 January 2026. On that reading it would have lapsed and the older, broader casualty deduction would have returned for 2026.
That is not what happened. Public Law 119-21, enacted 4 July 2025, struck the expiry language. The federally-declared-disaster limitation is now permanent and applies to tax years beginning after 31 December 2025. Any guidance still telling you the rule expires after 2025 is describing a version of the law that was changed.
What we could not confirm. The sunset removal is recorded in the Cornell LII editorial amendment note for section 165 rather than in a sentence of statutory text we could quote directly — the operative text simply no longer contains the expiry clause. IRS Publication 547 separately confirms the base post-2017 rule verbatim, and separately mentions Pub. L. 119-21 extending special return procedures for certain disasters declared between 1 January 2020 and 2 September 2025, which is a related but different provision and is not the same amendment.
What this means in practice
- Ordinary bad luck is not deductible. Fire, theft, a fallen tree, a flooded basement from a plumbing failure — if there is no federal declaration covering your area, there is no personal casualty deduction.
- The declaration is geographic and event-specific. It is not enough that a disaster was severe; it must be declared, and your county must be included.
- Insurance became the whole answer. Before 2018 the tax code absorbed part of an uninsured loss. It no longer does, which raises the real cost of being underinsured.
That last point is the one that matters for planning. Dropping or thinning coverage once the mortgage is gone used to have a partial tax backstop. It does not any more.
How a disaster gets declared
All requests for a declaration by the President that a major disaster exists shall be made by the Governor of the affected State. … Based on the request of a Governor under this section, the President may declare under this chapter that a major disaster or emergency exists. … a finding that the disaster is of such severity and magnitude that effective response is beyond the capabilities of the State and the affected local governments and that Federal assistance is necessary … the Governor shall take appropriate response action under State law and direct execution of the State’s emergency plan.
— 42 U.S.C. 5170 (Robert T. Stafford Disaster Relief and Emergency Assistance Act — Procedure for declaration)
So the gate is a governor’s request and a presidential decision — not the severity of your own loss. Two identical house fires, one inside a declared wildfire zone and one a county away, are treated completely differently by the tax code.
Related: what federal disaster aid actually covers · why flood is never in your policy.
General information drawn from the Internal Revenue Code, IRS publications, FEMA and NFIP materials and state statute, not legal, tax, financial or insurance advice. Insurance is regulated at STATE level and policy wording controls – your own policy, its endorsements and its exclusions decide what is covered, and no page can tell you what yours says. FEMA and NFIP figures change and every figure here is year-labelled with its source named. We are not an insurer, an agent, a broker or a public adjuster, and we sell nothing on these pages.