Beginning January 2018–December 2025, personal casualty losses are nondeductible unless attributable to a federally declared disaster.
How the tax reform affects personal casualty losses
If your client suffers a personal casualty loss from a disaster declared by the president under Section 401 of the Stafford Disaster Relief and Emergency Assistance Act, your client can claim a personal casualty loss as an itemized deduction, subject to the $100-per-casualty and 10%--of-adjusted-gross-income (AGI) limitations.
If your client has personal casualty gains, you can still offset personal casualty losses against those gains, even if their losses aren't considered a federally declared disaster.
Qualifying for personal casualty losses under the tax reform
Follow these steps to qualify for personal casualty losses under these guidelines:
- Go to Screen 17, Dispositions.
- Scroll to the Casualties and Thefts (4868) section.
- Enter your Description (fire, robbery, etc.).
- Enter a 1 in the field 1=personal, 2=business, 3=income, 4=employee.
- From the options in the Disaster loss (Ctrl+T) dropdown menu, select Federally declared disaster, occured in 2018, 2019 or 2020.