Each year, hurricanes, floods, wildfires, and other natural disasters cause significant damage to homes and personal property across the U.S. If you suffered losses due to a qualifying disaster, you may be able to claim a casualty loss tax deduction. Recent legislation has made important changes to these rules, so understanding what qualifies — and how much you can deduct — is essential.
What Casualty Losses Are Deductible?
Federally Declared Disasters (2018–2025)
Under the Tax Cuts and Jobs Act (TCJA), personal casualty loss deductions for tax years 2018 through 2025 are generally limited to losses caused by federally declared disasters. This limitation applies to your 2025 federal income tax return, which is due on April 15, 2026.
Before the TCJA, taxpayers could potentially deduct losses from events such as theft, vandalism, or accidents, even if they weren’t connected to a declared disaster. Those broader rules no longer apply for most taxpayers.
Permanent Disaster Limitation — With an Expansion
The One Big Beautiful Bill Act (OBBBA), signed into law last year, generally made the TCJA disaster limitation permanent. However, it also expanded eligibility in one important way.
Beginning January 1, 2026, certain state-declared disasters may also qualify for the casualty loss deduction. This change will apply to the 2026 tax return you’ll file in 2027.
Exception for Casualty Gains
There is an exception to the disaster requirement. If your insurance reimbursement exceeds the tax basis of the damaged or destroyed property, you may have a personal casualty gain. In that case, you can deduct non-declared disaster losses up to the amount of those gains.
Additional Limits on the Casualty Loss Deduction
Even when a loss qualifies, several additional restrictions apply.
Insurance Reductions and the $100 Rule
First, your casualty loss must be reduced by any insurance proceeds you receive. If insurance fully reimburses you for the loss, no deduction is allowed.
If insurance only partially covers the loss, you must subtract $100 per casualty event from the remaining uninsured amount.
The 10% of AGI Threshold
After accounting for insurance and the $100 reduction, only the portion of your loss that exceeds 10% of your adjusted gross income (AGI) is deductible.
Example:
If your 2025 AGI is $100,000 and your qualifying casualty loss (after insurance and the $100 reduction) is $11,000, you may deduct only $1,000.
Itemizing Is Required — and That Matters
To claim a casualty loss deduction, you must itemize deductions. Since the TCJA significantly increased the standard deduction — and the OBBBA raised it further — fewer taxpayers benefit from itemizing.
Standard Deduction Amounts
For 2025:
- Single filers: $15,750
- Heads of household: $23,625
- Married filing jointly: $31,500
For 2026:
- Single filers: $16,100
- Heads of household: $24,150
- Married filing jointly: $32,200
If your total itemized deductions don’t exceed the applicable standard deduction, claiming a casualty loss may not reduce your tax liability — even if the loss itself qualifies.
Need Help Determining Eligibility?
Casualty loss rules are complex and highly fact-specific. If you’ve experienced a disaster-related loss, we can help you determine whether you qualify for a casualty loss deduction — and whether claiming it will actually benefit you on your 2025 income tax return.
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