Elimination of Casualty Loss Except for Federally Declared Disaster
If you have an uncompensated loss arising from fire, storm, shipwreck, weather (such as a hurricane or tornado), earthquake, theft etc. under the law prior to the Tax Cuts law, you could deduct this loss as an itemized deduction.
Under the new law, casualty losses incurred before January 1, 2026 are no longer deductible UNLESS they arise in a federally declared disaster area.
Sandy’s elaboration: Thus, unless you are in a federally declared disaster area, you will no longer be able to deduct damage from fire, theft, tornadoes, hurricanes or earthquakes etc.. I STRONGLY recommend that you reevaluate your property insurance coverage on everything that you own to be sure you are covered as much as possible. To maximize reimbursements from your insurance carrier, be sure to video record all your items in your home and used for business too. If it involves electronic equipment or furniture, be sure to dictate any serial numbers into the recording. Thus, if your house or business is burglarized, you can trace your equipment.
Sandy’s tip: The removal of casualty losses applies to individual casualty losses. I would guess that casualty losses of business property are still around. Thus, if you have a casualty loss affected a warehouse, commercial or investment building etc., you can still take it. Also, the disallowance of casualty losses doesn’t apply to the extent that you have casualty gains.
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