Updated October 24, 2026. Quick answer: Tax Topic 515 is the IRS page on casualty, disaster and theft losses. It says personal casualty losses are generally deductible only when caused by a federally declared disaster, that insurance reimbursements reduce the loss, and that Form 4684 is used to report it.
Quick reference
| Item | What the IRS topic says |
|---|---|
| What a casualty is | “A casualty loss can result from the damage, destruction, or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption.” |
| What it is not | “A casualty doesn’t include normal wear and tear or progressive deterioration.” |
| Insurance | “You may not deduct losses covered by insurance, unless you file a timely claim for reimbursement, and you reduce the loss by the amount of any reimbursement or expected reimbursement.” |
| Where to report | “Report casualty and theft losses on Form 4684, Casualties and Thefts” |
| Casualty timing | “Casualty losses are deductible in the year you sustain the loss, which is generally in the year the casualty occurred.” |
What counts as a casualty or a theft
The topic starts with the kind of event. The IRS topic says “A casualty loss can result from the damage, destruction, or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption.” It then marks the edge: “A casualty doesn’t include normal wear and tear or progressive deterioration.”
Theft gets a definition of its own. The topic says “A theft is the taking and removal of money or property with the intent to deprive the owner of it.” The deduction rule for personal losses is narrower than many readers expect. The topic says “Beginning with tax year 2018, a deduction is generally not available for net personal casualty losses (personal casualty losses in excess of personal casualty gains) unless the loss is caused by a federally declared disaster.” Our page on casualty losses after the TCJA goes through that change.
Sizing the loss and subtracting reimbursements
For the amount, the topic says “If your property is personal-use property or isn’t completely destroyed, the amount of your casualty loss is the lesser of” two figures, the adjusted basis of the property or the decrease in its fair market value because of the casualty.
Reimbursements come off the top. The topic says “You must reduce the loss, whether it’s a casualty or theft loss, by any salvage value and by any insurance or other reimbursement you receive or expect to receive.”
If an insurance payment is bigger than what the property cost you, the topic says “you will typically, subject to a few exceptions for items like inventory, have a capital gain.”
Claiming the loss and when to deduct it
On where the deduction goes, the topic says “Individuals may claim their personal casualty loss as an itemized deduction on Schedule A (Form 1040), Itemized Deductions”. For property held for personal use, it gives two reductions: “you must subtract $100 from each casualty or theft event that occurred during the year after you’ve subtracted any salvage value and any insurance or other reimbursement.” It continues: “Then add up all those amounts and subtract 10% of your adjusted gross income from that total to calculate your allowable casualty and theft losses for the year.”
The form itself is described this way: “Use Section A for personal-use property and Section B for business or income-producing property.” Our pages on Form 4684 and Form 4684 Section A cover the lines.
Timing differs for theft. The topic says “Theft losses are generally deductible in the year you discover the property was stolen unless you have a reasonable prospect of recovery through a claim for reimbursement.” It also says “You have not sustained a loss if you have a reasonable prospect of recovery through a claim for reimbursement.” Last, it notes “You don’t have to be in business to have an NOL from a casualty.”
Where this comes from
This page describes the IRS page titled Topic no. 515, Casualty, disaster, and theft losses, as served on irs.gov on October 24, 2026. The IRS page shows that it was last reviewed or updated on 24 Sep 2026. The IRS can change a topic after we read it, and the IRS page controls. General information, not tax or legal advice.
Common mistakes
- Deducting damage from gradual decline. The topic says a casualty “doesn’t include normal wear and tear or progressive deterioration”
- Ignoring an insurance claim. The topic says you reduce the loss by any reimbursement “you receive or expect to receive”
- Skipping the disaster condition for a personal loss. The topic says a deduction is generally unavailable “unless the loss is caused by a federally declared disaster”
- Taking the full loss with no reductions. The topic says to “subtract $100 from each casualty or theft event”
- Deducting a theft loss while a claim is still open. The topic says that with a “reasonable prospect of recovery through a claim for reimbursement” the deduction waits
Related: IRS tax topics by number, Casualty losses after the TCJA, Form 4684, Form 4684 Section A, personal use property, Schedule A (Form 1040), and Schedule A line 15: federally declared disaster losses.
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Answer againSources
- IRS, Topic no. 515, Casualty, disaster, and theft losses (irs.gov): https://www.irs.gov/taxtopics/tc515
- IRS, Tax topics index (irs.gov): https://www.irs.gov/taxtopics
Read from the IRS pages linked above on October 24, 2026. General information, not tax or legal advice. The IRS topic page and the instructions for your own form control, and your own facts decide the outcome.