What Is Form 4684? Casualty, Theft, and Disaster Loss Deduction

Form 4684, Casualties and Thefts, is the IRS form you use to calculate and claim a deduction for property lost or damaged through a casualty or theft. Starting in 2026, the One Big Beautiful Bill Act permanently limits personal casualty loss deductions to losses from federally or state-declared disasters, and it makes the $100-per-event floor and the 10-percent adjusted gross income threshold permanent as well.¹ Business and income-producing property losses follow separate, more generous rules.

What Counts as a Casualty or Theft

A casualty is damage, destruction, or loss of property from an event that is sudden, unexpected, or unusual. The IRS lists fires, earthquakes, floods, hurricanes, tornadoes, volcanic eruptions, sonic booms, shipwrecks, vandalism, terrorist attacks, and car accidents as examples.² “Sudden” is doing real work in that definition. Slow damage like termite infestation, rust, or wood rot doesn’t qualify because it isn’t a single identifiable event.

Theft is the unlawful taking of money or property with intent to deprive you of it. Burglary and robbery are the obvious examples, but the definition also covers extortion, blackmail, embezzlement, and certain fraudulent investment schemes. Losing or misplacing property doesn’t count.

The 2026 Disaster-Only Rule for Personal Property

From 2018 through 2025, the Tax Cuts and Jobs Act restricted personal casualty loss deductions to losses caused by federally declared disasters.³ The One Big Beautiful Bill Act made that restriction permanent and slightly expanded it. Beginning in 2026, losses from state-declared disasters also qualify.¹ A state-declared disaster covers natural catastrophes such as hurricanes, tornadoes, storms, earthquakes, fires, and floods that a state governor formally declares.

The practical effect: if a tree falls on your house in a storm and neither the president nor your governor declares a disaster, you generally cannot deduct the personal loss. One narrow exception exists. If insurance pays you more than your basis in damaged property, creating a personal casualty gain, you can offset that gain with personal casualty losses from non-disaster events, but only up to the amount of the gain.³

This disaster requirement applies only to personal-use property. Losses on business or income-producing property remain deductible whether or not a disaster is declared.

How the Deduction Is Calculated

The math on Form 4684 moves through several layers before landing on a deductible number. Each layer trims the figure, and smaller losses often disappear altogether.

Basis, Fair Market Value, and Insurance

You need three figures for each damaged or stolen item: your adjusted basis (usually cost plus improvements minus depreciation), the fair market value immediately before the event, and the fair market value immediately after. The decrease in value is the difference between the before and after figures. Your loss for that item is the lesser of the decrease in value or the adjusted basis, reduced by any insurance or other reimbursement.² If the property is completely destroyed or stolen and nothing is reimbursed, the loss equals your adjusted basis.

Appraisals are the strongest valuation evidence, but the IRS accepts alternatives for smaller residential losses. A single written good-faith repair estimate is enough for personal-use residential property damaged up to $5,000. For losses up to $20,000, you can substitute the lower of two itemized estimates from independent licensed contractors. For business property that isn’t completely destroyed, actual repair costs can stand in for the decrease in value if the repairs are necessary, not excessive, address only the damage, and don’t leave the property worth more than before.

The $100 and 10-Percent Reductions

Two statutory reductions then apply to personal-use losses. First, each separate casualty or theft event is reduced by $100.⁴ A single storm that damages both your house and your car is one event and one $100 reduction. Two storms in the same year are two events and two reductions.

Second, the combined personal casualty losses for the year, after the $100 reductions, must exceed 10 percent of your adjusted gross income. Only the amount above that threshold is deductible.⁴ At an AGI of $80,000, the first $8,000 of net losses produces no deduction at all. That threshold is why smaller claims rarely generate any tax benefit.

You Have to Itemize

Personal casualty losses go on Schedule A, so you have to itemize instead of taking the standard deduction. For 2026, the standard deduction is $16,100 for single filers, $24,150 for heads of household, and $32,200 for married couples filing jointly.¹ Your total itemized deductions have to clear those amounts to make itemizing worthwhile. Qualified disaster losses are the exception.

Qualified Disaster Losses

Not all federally declared disaster losses are treated the same. Certain major disasters designated by specific legislation qualify for more favorable treatment. These losses carry a $500 per-event floor instead of $100, they are exempt from the 10-percent AGI threshold, and you can claim them without itemizing your other deductions.⁵ The list of qualifying disasters is updated periodically by Congress, and the Form 4684 instructions for each tax year identify which events are covered.

If your loss stems from a qualifying event, the deduction is much easier to reach. Even moderate losses can produce meaningful relief because the 10-percent AGI floor and the standard-deduction hurdle both fall away.

Business and Income-Producing Property

Losses on business property and property held to produce income, such as rental real estate or investment assets, skip both the $100-per-event reduction and the 10-percent AGI floor.² They also don’t need to tie back to a declared disaster. A fire that destroys business equipment is deductible whether or not any official has declared anything.

Business losses are reported in Section B of Form 4684. Depreciable property and real estate used in a trade or business typically flow to Form 4797 (Sales of Business Property); capital assets go to Schedule D. Mixed-use property is split between personal and business portions, and the personal-use rules apply only to the personal share.

Claiming a Disaster Loss on the Prior Year’s Return

If your loss is from a federally or state-declared disaster, you can elect to deduct it on the return for the year immediately before the disaster.⁶ The election goes through Section D of Form 4684. It can produce cash faster because you’re amending a return for a year that’s already closed rather than waiting to file the disaster year’s return.

The deadline for the election is six months after the regular due date of your return for the disaster year, without extensions. For a calendar-year individual taxpayer, that means October 15 of the year after the disaster.⁷ Electing prior-year treatment means agreeing not to deduct the same loss on the disaster year’s return.

When Insurance Pays More Than Your Basis

Sometimes insurance proceeds exceed the adjusted basis of the destroyed property. That produces a casualty gain, and it’s generally taxable.³ Section 1033 of the tax code lets you defer the gain if you buy replacement property similar in use to what you lost. The general replacement period is two years after the close of the first tax year in which you realize the gain.⁸ For a principal residence damaged in a federally declared disaster, the window is four years. You can also request an extension from the IRS. Unlike a 1031 exchange, no qualified intermediary is needed and there’s no 45-day identification period; you buy the replacement property within the allowed time and report the deferral on your return.

Ponzi Scheme and Investment Fraud Losses

Victims of fraudulent investment schemes, including Ponzi schemes, report their losses in Section C of Form 4684. Revenue Procedure 2009-20 provides an optional safe harbor that avoids the forensic work of establishing exactly when the theft occurred and how much of the reported income was fictitious.⁹

Under the safe harbor, the deductible loss is a percentage of your “qualified investment,” roughly the money you put in plus the income you reported on prior returns, minus withdrawals. The percentage is 95 percent if you are not pursuing recovery from third parties, and 75 percent if you are pursuing or intend to pursue such recovery (through lawsuits or claims against brokers, for instance). The applicable percentage is then reduced by amounts actually recovered and any expected insurance or SIPC payments.⁹ The loss is treated as a theft loss in the year the fraud was discovered, so victims don’t have to wait for litigation to close before claiming the deduction.

The Four Sections of Form 4684

Form 4684 is divided into four sections, each handling a different type of loss:¹⁰

Section A covers personal-use property. You describe each item, enter the relevant dates, list basis and before-and-after fair market values, subtract insurance, and apply the $100 (or $500) per-event floor along with the 10-percent AGI threshold.
Section B covers business and income-producing property. The calculations are similar but skip the $100 floor and AGI threshold, and require more detail on depreciation and asset type.
Section C covers theft losses from Ponzi schemes and other fraudulent investment arrangements under Revenue Procedure 2009-20.
Section D handles the election to claim a disaster loss on the prior year’s return.

For each item, you enter a description, the acquisition date, the date of the casualty or discovery of the theft, and whether an insurance claim is still pending. If a reimbursement claim exists and hasn’t been settled by the filing deadline, you can’t deduct the portion you reasonably expect to recover. Personal-use losses from Section A flow to Schedule A. Business losses from Section B usually flow to Form 4797 or Schedule D depending on the property type. The completed Form 4684 attaches to your Form 1040 or Form 1040-SR.⁶

Documenting the Loss

The IRS won’t take your word for the numbers, and this is where most claims come apart. For the property, you need proof of ownership and cost basis: purchase contracts, closing statements, receipts for improvements, and depreciation schedules. For the event, gather police reports for thefts and FEMA declarations, weather records, or fire department reports for casualties. Insurance claim files and settlement letters establish reimbursement amounts.

For fair market value, a professional appraisal before and after the event is the strongest evidence. The IRS accepts repair-cost estimates in place of formal appraisals for smaller personal-use residential losses under the thresholds described above. Photographs and video of the property before and after help support the claim without replacing the valuation evidence. Auditors regularly ask for appraisal reports, police records, insurance files, and disaster-area designations when a large deduction is claimed, and organized documentation is the single most important thing protecting the deduction.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
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Internal Revenue Service. Publication 547 (2025), Casualties, Disasters, and Thefts
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Internal Revenue Service. Reporting Casualty and Theft Losses
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Office of the Law Revision Counsel. 26 USC 165 – Losses
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Internal Revenue Service. 2025 Instructions for Form 4684 – Casualties and Thefts
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Internal Revenue Service. Instructions for Form 4684 (2025)
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eCFR. 26 CFR 1.165-11 – Election to Take Disaster Loss Deduction for Preceding Year
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Office of the Law Revision Counsel. 26 USC 1033 – Involuntary Conversions
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Internal Revenue Service. Rev. Proc. 2009-20
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Internal Revenue Service. About Form 4684, Casualties and Thefts