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IRS.gov Website
Publication 547
taxmap/pubs/p547-008.htm#en_us_publink1000225406

Disaster Area Losses(p14)

rule
This section discusses the special rules that apply to federally declared disaster area losses. It contains information on when you can deduct your loss, how to claim your loss, how to treat your home in a disaster area, and what tax deadlines may be postponed. It also lists Federal Emergency Management Agency (FEMA) phone numbers. (See Contacting the Federal Emergency Management Agency (FEMA), later.)
A federally declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. It includes a major disaster or emergency declaration under the Act.
Deposit
A list of the areas warranting public or individual assistance (or both) under the Act is available at FEMA.gov/Disasters.
taxmap/pubs/p547-008.htm#en_us_publink100071819

Disaster year.(p14)

rule
The disaster year is the tax year in which you sustained the loss attributable to a federally declared disaster. Generally, a disaster loss is sustained in the year the disaster occurred. However, a disaster loss may also be sustained in a year after the disaster occurred. For example, if a claim for reimbursement exists for which there is a reasonable prospect of recovery, no part of the loss for which reimbursement may be received is sustained until it can be ascertained with reasonable certainty whether you will be reimbursed.
taxmap/pubs/p547-008.htm#en_us_publink1000225410

When to deduct the loss.(p14)

rule
You generally must deduct a casualty loss in the disaster year. However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can elect to deduct that loss on your return or amended return for the tax year immediately preceding the disaster year. If you make this election, the loss is treated as having occurred in the preceding year. A list of areas warranting public or individual assistance (or both) is available at the FEMA website at FEMA.gov/Disasters.
You must make the choice to take your casualty loss for the disaster in the preceding year on or before the date that is six months after the regular due date for filing your original return (without extensions) for the disaster year. If you are a calendar year taxpayer, you have until October 15, 2018, to amend your 2016 tax return to claim a casualty loss that occurred during 2017.
Deposit
If you previously obtained a 6-month extension of time to file your original 2016 return and you are an affected taxpayer as a result of Hurricane or Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, or the California wildfires, you have until January 31, 2018, to timely file and make this election, except that taxpayers affected by Hurricane Maria in Puerto Rico or the U.S. Virgin Islands have until June 29, 2018, to do so.
taxmap/pubs/p547-008.htm#en_us_publink100077926

How to deduct your loss in the preceding year.(p15)

rule
If you have already filed your return for the preceding year, you can claim a disaster loss against that year's income by filing an amended return. Individuals file an amended return on Form 1040X. (See How to report the loss on Form 1040X, later.)
If you make this election for a disaster loss sustained in 2017, include a statement with your 2016 original or amended return saying that you are making this election. Specify the name (or give a description) of the disaster, the date(s) of the disaster, and address, including the city or town, county or parish, state, and zip code in which the damaged or destroyed property was located. The statement can be made on the return (for example, on line 1 or 19 of Form 4684) or on an attachment filed with the return. See the 2016 Instructions for Form 4684 for more detailed information on how to claim these losses on your original or amended 2016 return.
If you claimed a deduction for a disaster loss on the tax return for the disaster year and you wish to deduct the loss in the preceding year, you must file an amended return to remove the previously deducted loss on or before the date you file the return or amended return for the preceding year that includes the disaster loss deduction.
Deposit
Claiming a qualifying disaster loss on the previous year's return may result in a lower tax for that year, often producing or increasing a cash refund.
taxmap/pubs/p547-008.htm#en_us_publink100077929
Revoking the election to deduct the loss in the preceding year.(p15)
You can revoke this election by filing an amended return for the preceding year that contains a revocation statement. The revocation statement must clearly state that the election is being revoked and include the name or a description of the disaster giving rise to the loss, the date or dates of the disaster, and address, including the city, town, county or parish, state, and ZIP code where the damaged or destroyed property was located at the time of the disaster and for which you originally made the election. You can provide this information in either the Explanation of Changes in Form 1040X or 1120X, or other appropriate form or on a statement attached to the amended return.
Your amended return eliminating the election must be filed on or before the date that is 90 days after the due date for making the election and on or before the date you file any return or amended return for the year that includes the disaster loss.
Your amended return (eliminating the previous disaster loss election) should refigure your tax liability as a result of revoking the election. You must pay or make arrangements to pay any tax and interest due as a result of the revocation.
taxmap/pubs/p547-008.htm#en_us_publink1000225414
Disaster loss to inventory.(p15)
If your inventory loss is from a disaster in an area designated by FEMA for public or individual assistance (or both), you may elect to deduct the loss on your return or amended return for the immediately preceding year. However, decrease your opening inventory for the year of the loss so that the loss won't be reported again in inventories.
taxmap/pubs/p547-008.htm#en_us_publink1000225415
Main home in disaster area.(p15)
If your home is located in a federally declared disaster area, you can postpone reporting the gain if you spend the reimbursement to repair or replace your home. Special rules apply to replacement property related to the damage or destruction of your main home (or its contents) if located in these areas. For more information, see Gains Realized on Homes in Disaster Areas in the Instructions for Form 4684.
taxmap/pubs/p547-008.htm#en_us_publink100079131

Qualified disaster losses.(p15)

rule
Qualified disaster losses are personal casualty losses sustained as a result of a federally declared disaster that occurred in 2016, as well as from Hurricane Harvey or Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, or the California wildfires (described below under Qualified 2017 disaster losses). You can deduct qualified disaster losses for both regular tax and alternative minimum tax (AMT) purposes without itemizing other deductions on Schedule A. Moreover, your net casualty loss from these qualified disasters doesn’t need to exceed 10% of your adjusted gross income to qualify for the deduction, but the $100 limit per casualty is increased to $500.
taxmap/pubs/p547-008.htm#en_us_publink100079132
Qualified 2017 disaster losses.(p15)
A qualified 2017 disaster loss is a personal casualty loss caused by:
In addition, the federal disaster declaration must have been made before September 21, 2017, for Hurricane Maria; before October 17, 2017, for Hurricane Harvey or Tropical Storm Harvey and Hurricane Irma; and between January 1, 2017 through January 18, 2018, for California wildfires.
taxmap/pubs/p547-008.htm#en_us_publink100079133

Cost indexes safe harbor method to calculate hurricane-related losses.(p15)

rule
Revenue Procedure 2018-09, 2018-2 I.R.B. 290, available at IRS.gov/irb/2018-02_IRB#RP-2018-09, provides a safe harbor method you may use to calculate the amount of your casualty losses for your personal-use residential real property damaged or destroyed in Texas, Louisiana, Florida, Georgia, South Carolina, the Commonwealth of Puerto Rico, or the territory of the U.S. Virgin Islands as a result of Hurricane and Tropical Storm Harvey, Hurricane Maria, or Hurricane Irma.
To figure the amount of your casualty losses, you generally must determine the decrease in the FMV of the damaged property through a competent appraisal or the cost of repairs you actually make. Revenue Procedure 2018-09 provides a safe harbor method that allows you to determine the decrease in FMV of your personal-use residential real property in other ways. If you qualify for and use the cost indexes safe harbor method described in Revenue Procedure 2018-09, the IRS won't challenge your determination. The use of the cost indexes safe harbor method isn't mandatory.
Under the cost indexes safe harbor method, you may use one or more cost indexes to figure the casualty loss to your personal-use residential real property.
taxmap/pubs/p547-008.htm#en_us_publink100081371
Personal-use residential real property. (p15)
Personal-use residential real property generally is real property, including improvements, that is owned by the individual who suffered a casualty loss and that contains at least one personal residence. It doesn’t include a personal residence if any part of the personal residence is used as rental property or contains a home office used in a trade or business or transaction entered into for profit.
For this purpose, a personal residence is a single-family residence or a single unit within a townhouse, duplex, or similar group of attached units. It includes any enclosed structures attached to the residence or unit, such as a garage. It doesn’t include a deck or screened-in porch. It also doesn’t include a mobile home, trailer, condominium, or any other buildings in which you have less than full ownership in all of the structural components, such as the roof, foundation, or exterior walls.
taxmap/pubs/p547-008.htm#en_us_publink100081372
Improvements.(p15)
The cost indexes safe harbor method applies only to three types of improvements on personal-use residential real property.
taxmap/pubs/p547-008.htm#en_us_publink100081373
Damage categories.(p15)
The cost indexes safe harbor method may be used if you suffered any of the following.
Revenue Procedure 2018-09 provides tables and calculation methods to determine the decrease in FMV for each category based on the cost per square foot or percentage of damage, the size of the property, and the geographic location.
taxmap/pubs/p547-008.htm#en_us_publink100079139
Total loss of a personal residence. (p16)
You had a total loss of a personal residence if, during one of the 2017 hurricanes, the residence sustained damage that caused any of the following.
taxmap/pubs/p547-008.htm#en_us_publink100079140
Near total loss of a personal residence. (p16)
A near total loss of a personal residence occurred if, during one or more of the 2017 hurricanes, the residence sustained severe damage requiring you to remove and dispose of substantially all interior wall frame coverings (including drywall), floorings, electrical lines, ducts, plumbing, and other fixtures. To qualify, only the wood frame, rafters, and outside facade of the personal residence can remain structurally sound and reusable.
taxmap/pubs/p547-008.htm#en_us_publink100079141
Structural damage from wind, rain, or debris to a personal residence.(p16)
Structural damage from wind, rain, or debris occurred if, during one or more of the 2017 hurricanes, a personal residence sustained major structural damage to the roof and/or outside wall(s) from wind or windblown debris that exposed part or all of the residence's interior to rain or debris, requiring substantial renovation of the damaged areas. Substantial renovation requires the removal and replacement of drywall or other wall frame coverings, replacement of trim, and repair and painting of the damaged interior areas of the personal residence.
taxmap/pubs/p547-008.htm#en_us_publink100079142
Damage to a detached structure.(p16)
Damage to a detached structure occurred if the structure sustained damage during one or more of the 2017 hurricanes that required either complete or major rebuilding.
taxmap/pubs/p547-008.htm#en_us_publink100079143
Increases to safe harbor loss amount. (p16)
The decrease in the FMV determined under the safe harbor is the full amount of the decrease and can’t be increased by amounts related to items such as landscaping, debris removal, or demolition.
taxmap/pubs/p547-008.htm#en_us_publink100079144
Decreases to safe harbor loss amount. (p16)
The loss determined through this method must be reduced by the value of any repairs provided by a third party at no cost (for example, work done by volunteers or via donations) to you. Figure the value of a no-cost repair by multiplying the total square footage completely repaired at no cost to you by the same cost index used to determine the decrease in the FMV of the property. Additionally, reduce your loss by the amount of any insurance, reimbursements, or other compensation received.
taxmap/pubs/p547-008.htm#en_us_publink100079145
Reporting requirements on Form 4684. (p16)
Attach a statement to Form 4684 stating that you used Revenue Procedure 2018-09 to determine the amount of your casualty loss. Include the specific table number used. When completing Form 4684, don’t enter an amount on line 5 or line 6 for each property. Instead, enter the decrease in the FMV determined using the safe harbor method on line 7. The cost indexes safe harbor method is subject to additional rules and exceptions. For more information, see Revenue Procedure 2018-09. You may qualify to use other safe harbor methods as well. See Revenue Procedure 2018-08, 2018-02 I.R.B. 286, available at IRS.gov/irb/2018-02_IRB#RP-2018-08, for more information.
taxmap/pubs/p547-008.htm#en_us_publink1000225416

Home made unsafe by disaster.(p16)

rule
If your home is located in a federally declared disaster area, your state or local government may order you to tear it down or move it because it is no longer safe to live in because of the disaster. If this happens, treat the loss in value as a casualty loss from a disaster. Your state or local government must issue the order for you to tear down or move the home within 120 days after the area is declared a disaster area.
Figure your loss in the same way as for casualty losses of personal-use property. (See Figuring a Loss, earlier.) In determining the decrease in FMV, use the value of your home before you move it or tear it down as its FMV after the casualty.
taxmap/pubs/p547-008.htm#en_us_publink1000225418
Unsafe home.(p16)
Your home will be considered unsafe only if both of the following apply.
taxmap/pubs/p547-008.htm#en_us_publink1000225419

Example.(p16)

Due to a severe storm, the President declared the county you live in a federal disaster area. Although your home has only minor damage from the storm, a month later the county issues a demolition order. This order is based on a finding that your home is unsafe due to nearby mud slides caused by the storm. The loss in your home's value because the mud slides made it unsafe is treated as a casualty loss from a disaster. The loss in value is the difference between your home's FMV immediately before the disaster and immediately after the disaster.
taxmap/pubs/p547-008.htm#en_us_publink1000225424
Figuring the loss deduction.(p16)
Unless you have a qualified disaster loss, discussed above, you must figure the loss under the usual rules for casualty losses, as if it occurred in the year preceding the disaster.
taxmap/pubs/p547-008.htm#en_us_publink1000225425

Example.(p16)

A disaster damaged your main home and destroyed your furniture in 2017. This was your only casualty loss for the year. Your home is located in a federally declared disaster area designated by FEMA for public or individual assistance (or both). The cost of your home and land was $134,000. The FMV immediately before the disaster was $147,500 and the FMV immediately afterward was $100,000. You separately figured the loss on each item of furniture (see Figuring the Deduction, earlier) and arrived at a total loss for furniture of $3,000. Your insurance didn't cover this type of casualty loss, and you expect no reimbursement for either your home or your furniture.
You elect to amend your 2016 return to claim your casualty loss for the disaster. Your adjusted gross income (AGI) on your 2016 return was $71,000. You figure your casualty loss as follows.
    Furnish-
  House ings
 1.Cost$134,000 $10,000
 2.FMV before disaster$147,500 $8,000
 3.FMV after disaster100,000 5,000
 4.Decrease in FMV (line 2 − line 3)$47,500 $3,000
 5.Smaller of line 1 or line 4$47,500 $3,000
 6.Subtract estimated
insurance
-0- -0-
 7.Loss after reimbursement$47,500 $3,000
 8.Total loss$50,500
 9.Subtract $100100
10.Loss after $100 rule$50,400
11.Subtract 10% of $71,000 AGI7,100
12.Amount of casualty loss deduction$43,300
taxmap/pubs/p547-008.htm#en_us_publink100052451

How to report the loss on Form 1040X.(p16)

rule
You should adjust your deductions on Form 1040X. The Instructions for Form 1040X show how to do this. Explain the reasons for your adjustment and attach Form 4684 to show how you figured your loss. See Figuring a Loss, earlier.
If the damaged or destroyed property was nonbusiness property or employee property and you didn't itemize your deductions on your original return, you must first determine whether the casualty loss deduction now makes it advantageous for you to itemize. It is advantageous to itemize if the total of the casualty loss deduction and any other itemized deductions is more than your standard deduction. If you itemize, attach Schedule A (Form 1040) or Form 1040NR, Schedule A, and Form 4684 to your amended return. Fill out Form 1040X to refigure your tax to find your refund.
taxmap/pubs/p547-008.htm#en_us_publink1000225431
Records.(p16)
You should keep the records that support your loss deduction. You don't have to attach them to the amended return.
If your records were destroyed or lost, you may have to reconstruct them. Information about reconstructing records is available at IRS.gov. Type "reconstructing your records" in the search box, or see Pub. 2194, Disaster Resource Guide.
taxmap/pubs/p547-008.htm#en_us_publink1000225432
Need a copy of your tax return for the preceding year?(p16)
It will be easier to prepare Form 1040X if you have a copy of your tax return for the preceding year. If you had your tax return completed by a tax preparer, he or she should be able to provide you with a copy of your return. If not, you can get a copy by filing Form 4506 with the IRS. There is a fee for each return requested. However, if your main home, principal place of business, or tax records are located in a federally declared disaster area, this fee will be waived. Write the name of the disaster in the top margin of Form 4506 (for example, "Texas Hurricane Harvey").
taxmap/pubs/p547-008.htm#en_us_publink1000225433

Federal loan canceled.(p17)

rule
If part of your federal disaster loan was canceled under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, it is considered to be reimbursement for the loss. The cancellation reduces your casualty loss deduction.
taxmap/pubs/p547-008.htm#en_us_publink1000225434

Federal disaster relief grants.(p17)

rule
Don't include post-disaster relief grants received under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, or funeral expenses. Don't deduct casualty losses or medical expenses to the extent they are specifically reimbursed by these disaster relief grants. If the casualty loss was specifically reimbursed by the grant and you received the grant after the year in which you deducted the casualty loss, see Reimbursement Received After Deducting Loss, earlier. Unemployment assistance payments under the Act are taxable unemployment compensation.
taxmap/pubs/p547-008.htm#en_us_publink1000225436

State disaster relief grants for businesses.(p17)

rule
A grant that a business receives under a state program to reimburse businesses for losses incurred for damage or destruction of property because of a disaster isn't excludable from income under the general welfare exclusion, as a gift, as a qualified disaster relief payment (explained next), or as a contribution to capital. However, the business can choose to postpone reporting gain realized from the grant if it buys qualifying replacement property within a certain period of time. See Postponement of Gain, earlier, for the rules that apply.
taxmap/pubs/p547-008.htm#en_us_publink1000225438

Qualified disaster relief payments.(p17)

rule
Qualified disaster relief payments aren't included in the income of individuals to the extent any expenses compensated by these payments aren't otherwise compensated for by insurance or other reimbursement. These payments aren't subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). No withholding applies to these payments.
Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses.
Qualified disaster relief payments also include amounts paid to individuals affected by the disaster by a federal, state, or local government in connection with a federally declared disaster. These payments must be made from a governmental fund, be based on individual or family needs, and not be compensation for services. Payments to businesses generally don't qualify.
EIC
Qualified disaster relief payments don't include:
  • Payments for expenses otherwise paid for by insurance or other reimbursements, or
  • Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation.
taxmap/pubs/p547-008.htm#en_us_publink1000225440

Qualified disaster mitigation payments.(p17)

rule
Qualified disaster mitigation payments made under the Robert T. Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) aren't included in income. These are payments you, as a property owner, receive to reduce the risk of future damage to your property. You can't increase your basis in the property, or take a deduction or credit, for expenditures made with respect to those payments.
taxmap/pubs/p547-008.htm#en_us_publink1000225441

Sale of property under hazard mitigation program.(p17)

rule
Generally, if you sell or otherwise transfer property, you must recognize any gain or loss for tax purposes unless the property is your main home. You report the gain or deduct the loss on your tax return for the year you realize it. (You can't deduct a loss on personal-use property unless the loss resulted from a casualty, as discussed earlier.) However, if you sell or otherwise transfer property to the federal government, a state or local government, or an Indian tribal government under a hazard mitigation program, you can choose to postpone reporting the gain if you buy qualifying replacement property within a certain period of time. See Postponement of Gain, earlier, for the rules that apply.
taxmap/pubs/p547-008.htm#en_us_publink1000225443

Gains.(p17)

rule
Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. For these special rules, see the following discussions.
taxmap/pubs/p547-008.htm#en_us_publink1000225444

Postponed Tax Deadlines(p17)

rule
The IRS may postpone for up to one year certain tax deadlines of taxpayers who are affected by a federally declared disaster. The tax deadlines the IRS may postpone include those for filing income, excise, and employment tax returns; paying income, excise, and employment taxes; and making contributions to a traditional IRA or Roth IRA.
If any tax deadline is postponed, the IRS will publicize the postponement in your area and publish a news release and, where necessary, in a revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Go to IRS.gov/Newsroom/Tax-Relief-In-Disaster-Situations to find out if a tax deadline has been postponed for your area.
taxmap/pubs/p547-008.htm#en_us_publink1000225445

Who is eligible.(p17)

rule
If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement.
taxmap/pubs/p547-008.htm#en_us_publink1000225446
Covered disaster area.(p17)
This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year.
taxmap/pubs/p547-008.htm#en_us_publink1000225447

Abatement of interest and penalties.(p18)

rule
The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines.
taxmap/pubs/p547-008.htm#en_us_publink1000225448

Contacting the Federal Emergency Management Agency (FEMA)(p18)

rule
If you live in an area that was declared a disaster area by the President, you can get information from FEMA by visiting DisasterAssistance.gov, or calling the following phone numbers. These numbers are only activated after a federally declared disaster.
taxmap/pubs/p547-008.htm#en_us_publink1000225388

Table 3. When To Deduct a Casualty or Theft Loss

IF you have a loss... THEN deduct it in the...
from a casualty year the loss occurred.
in a federally declared disaster area disaster year or the year immediately
before the disaster year.
from a theft year the theft was discovered.
on a deposit treated as a casualty  year a reasonable estimate can be made.