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If you've suffered the results of a theft, accident, fire, flood, or some other casualty during the year, you may be able to deduct some of your unreimbursed losses.
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In particular, it's important to know that if you're in an area that was declared a federal disaster area by the President, the tax deduction for your casualty losses can be claimed retroactively, by treating them as if they occurred in the previous year and filing an amended tax return for that year. This allows you to receive a quick tax refund -- money that you can use right away.
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Casualty losses are treated somewhat differently depending on whether the loss occurred to property used in your trade or business, property used to generate investment income, or property used for personal or family purposes. However, regardless of the type of property, the loss must first be reported on IRS Form 4684, Casualties and Thefts. For that reason we're going to discuss all types of casualties, both business and personal, in the following section.
In order to understand and claim a casualty loss on your tax return, you need to know:
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