J.K. Lasser's Your Income Tax 2022

CHAPTER 18Casualty and Theft Losses and Involuntary Conversions

An itemized deduction for casualty and theft losses of personal-use property is allowed for 2018 through 2025 only if the losses are attributed to federally declared disasters. An eligible loss is deductible for the year it is “sustained” (18.2). The loss is claimed on Form 4684 and the allowable amount is entered on Schedule A (Form 1040 or 1040-SR). If you have a “qualified disaster loss” for 2021 (18.8) or a qualified disaster loss from a prior year that was not “sustained” until 2021, and you do not itemize deductions on Schedule A for 2021, you can increase your 2021 standard deduction by the loss (13.1).

A loss of property held for:

• Personal purposes must be attributable to a federally declared disaster (18.1) and the loss is subject to a dollar floor that reduces the deduction by $100, or by $500 for a qualified disaster loss (18.8). In addition, net losses for personal-use assets are reduced by 10% of your adjusted gross income on Form 4684, unless the loss is a qualified disaster loss (18.8).
• Income-producing purposes, such as negotiable securities, should be claimed on Form 4684 and then entered on Line 16 of Schedule A as an “other itemized deduction” (19.1).
• Business or rental purposes is claimed on Form 4684 and then as a loss on Form 4797. It is not subject to any floor. Follow the instructions to Form 4684.

If you have realized a gain, you may defer tax by replacing or repairing the property