When a natural disaster has destroyed your personal property, the last thing you’re likely to think about is taxes. You’re probably worrying about cleaning up, filing insurance claims, and getting your life back to normal. 

But one way to get assistance from the federal government is through the tax code. The IRS gives you a way to get some tax money back to help you recover. Federal tax law lets you deduct uninsured and unreimbursed casualty losses from a disaster on your tax return.

And you don’t have to wait until next tax season to do it. If you live in an area deemed a federal disaster area, you can amend your 2016 tax return to claim those casualty losses as soon as you know what the losses will be. That way, you can potentially get a refund far sooner than if you waited to deduct those losses when filing your 2017 return next April.

If you have insurance, the loss has to be fairly substantial to merit a deduction. Nevertheless, if you itemize, it might be worth investigating the issue with tax software or a professional.

What's Covered?

The Internal Revenue Service defines a casualty as the “damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual.” That generally includes natural and man-made disasters such as earthquakes, fires, floods, car accidents, vandalism, and terrorist attacks. A loss that could have been prevented—such as some types of mold buildup—wouldn’t count.

More on Weather Emergencies

Once you know what your insurer will pay, you can figure your casualty loss for tax purposes. For real estate, your casualty loss is your adjusted basis—purchase price plus documented improvements of the property before the loss—or the decrease in fair market value of the property after the loss, whichever is less. From that, you subtract insurance and other payments.

For personal property, such as cars, furniture, and clothing, you must show the fair market value of the items before and after the damage. You can document your loss with receipts and photographs or videos of your property, just as you would for your insurer. Report your totals on IRS Form 4684, Casualties and Thefts.

Figuring Your Deduction

There’s still more to do to determine your deduction. Subtract $100 from your estimated loss, then subtract 10 percent of your adjusted gross income. If the result is a positive number, that’s your deduction. 

If your property is in a region declared a disaster area by the president, you can immediately claim a casualty loss on an amended federal return from last year. A tax pro can help you decide which approach will save you more. Folks in those areas who planned to file their 2016 returns in mid-October—and those who regularly pay quarterly estimated taxes—also can take advantage of extended tax-filing deadlines

Incidentally, losses from thefts also can be deducted, though they can’t be claimed on the 2016 return like disaster losses can. Theft, in the IRS’ view, can include fraud or misrepresentation that’s deemed illegal under state or local laws. Victims of Ponzi schemes or other scams can take a deduction under this definition. But a decline in stock value resulting from fraud committed at a legitimate corporation must be claimed as a capital loss.

For more information, see IRS Publication 547, Casualties, Disasters, and Thefts.