Prior Law
Through December 31, 2017
In general, the deduction for casualty and theft losses of personal-use property is subject to two limitations: the $100 per-casualty floor and the 10%-of-adjusted-gross-income (10%-of-AGI) threshold.
Under the pre-Tax Cuts and Jobs Act law, for individuals, losses of property not connected with a trade or business or a transaction entered into for profit were deductible as personal casualty losses if the losses were the result of fire, storm, shipwreck, or other casualty, or of theft.
New Law
Effective for tax years beginning after December 31, 2017
For tax years beginning after December 31, 2017, and before January 1, 2026, the Tax Cuts and Jobs Act law provides that if an individual has a net disaster loss (for this purpose, the definition above applies, except the timeframe is changed to any tax year beginning after December 31, 2015 and before January 1, 2018), personal casualty and theft losses of an individual are deductible only to the extent they’re attributable to a federally declared disaster (“federal disaster losses”).
- The $100-per-casualty floor is increased to $500.
- The 10%-of-AGI threshold then applies.
Commentary
What this says is that while the Casualty and Theft loss deduction was revoked, the deduction for casualty disaster losses is available and the floor is raised from $100 to $500. The 10% of AGI limitation is retained.
Individuals may deduct personal property losses that are not covered by insurance or other reimbursements, but they must first subtract $500 for each casualty event and then subtract ten percent of their adjusted gross income from their total casualty losses for the year.
Again, these have to be in qualified disaster areas, i.e. federally declared disasters. You will be able to get more information on Publication 547.
