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A casualty, for federal income tax purposes, is a sudden, unexpected, or unusual loss or damage to some property you own.
Examples of events that typically cause casualty losses are earthquakes, hurricanes, tornadoes, floods, storms, volcanic eruptions, shipwrecks, cave-ins, sonic booms, fires, car accidents, airplane crashes, riots, vandalism, burglaries, larcenies, or embezzlement.
Examples of events that are not considered deductible casualties are progressive deterioration caused by age, wind and weather, wood rot, termites or other insect infestation, or drought.
Simply misplacing or losing property does not qualify as a tax-deductible casualty, even though your insurance company may consider it a reimbursable loss. However, if you lose property in conjunction with another accident, it may qualify.
For instance, if you were involved in a car accident that scattered your property into the surrounding area and some of your jewelry was never found, you can deduct the loss of the jewelry.