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IRS.gov Website
Publication 976
taxmap/pubs/p976-003.htm#en_us_publink100075853

Casualty and Theft Losses(p7)

rule
The following section provides information on special relief related to personal casualty losses. For more information, see Form 4684, Casualties and Thefts, and its separate instructions, and Pub. 547.
taxmap/pubs/p976-003.htm#en_us_publink100078112

Qualified Disaster Losses(p8)

rule
Personal casualty losses resulting from federally declared disasters that occurred in 2016, as well as Hurricane Harvey or Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, and the California wildfires that occurred in 2017, may be claimed as a qualified disaster loss on your Form 4684. You can deduct 2016 and 2017 qualified disaster losses for both regular and AMT purposes without itemizing other deductions on Schedule A. Moreover, your net casualty loss from these qualified disasters does not need to exceed 10% of your AGI to qualify for the deduction, but the $100 limit per casualty is increased to $500. See Qualified 2016 Disasters, later, for a list of 2016 federally declared disasters, and Qualified 2017 disaster losses next.
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Qualified 2017 disaster losses.(p8)

rule
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.
See Form 4684 and its separate instructions for information and computational rules on claiming the special relief for these qualified disaster losses when completing line 11 and line 15 of Form 4684.
taxmap/pubs/p976-003.htm#en_us_publink100078114

Election To Deduct Loss in the Preceding Year(p8)

rule
Casualty and theft losses are generally deductible only in the year the loss was sustained. A loss is generally sustained in the year in which the casualty or theft occurred. A loss may be treated as sustained in a later year if, for example, a claim for reimbursement from insurance is pending in the year in which the casualty or theft occurred. However, if you have a casualty loss attributable to a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can elect to deduct the loss in the tax year immediately before the loss was sustained. Therefore, if you sustained a qualified 2017 disaster loss, you may choose to take the loss into account on your 2016 tax return instead of your 2017 tax return. A list of areas warranting public or individual assistance (or both) is available at the Federal Emergency Management Agency (FEMA) website at FEMA.gov/Disasters.
This election must be made by filing your return or amended return for the earlier year, and claiming your disaster loss on it, 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. For most people, that means you can make the election to deduct a disaster loss sustained in 2017 on your amended 2016 return on or before October 15, 2018.
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 a qualified 2017 disaster loss, 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/p976-003.htm#en_us_publink100078115

Claiming qualified 2017 disaster losses on an original or amended 2016 return.(p8)

rule
If you are filing or amending your 2016 tax return, write "Federally Declared Disaster" if you have a qualified 2017 disaster loss across the top of your Form 1040, Form 1040NR, or Form 1040X (whichever applies). You must also complete and attach Schedule A and the 2016 Form 4684. If you already filed your 2016 tax return, you can amend it to claim your qualified disaster loss by filing a Form 1040X. See the 2016 Instructions for Form 4684 for more information.
If you have not filed your 2016 tax return and you want to deduct or increase your standard deduction by your net qualified disaster loss on your 2016 tax return, you must file on paper. You may not file electronically. Use either Form 1040 or Form 1040NR. Write "Federally Declared Disaster" across the top of your paper tax return. To figure your net qualified disaster loss, see the Instructions for Form 4684.
taxmap/pubs/p976-003.htm#en_us_publink100078116

Cost Indexes Safe Harbor Method To Calculate Hurricane-Related Losses to Personal-Use Residential Real Property(p8)

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 Harvey, Tropical Storm Harvey, Hurricane Irma, or Hurricane Maria.
To figure your casualty losses, you generally must determine the decrease in the fair market value (FMV) of the damaged property using a competent appraisal or the cost of repairs you actually make. But Revenue Procedure 2018-09 provides a safe harbor method that allows you to determine the decrease in the 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 will not challenge your determination. The use of the cost indexes safe harbor method described in Revenue Procedure 2018-09 is not 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. The cost indexes safe harbor method may be used if you suffered any losses listed under Damage categories, later.
Revenue Procedure 2018-09 provides tables and calculation methods to determine the decrease in the FMV for each category based on the cost per square foot or percentage of damage, the size of the property, and the geographic location.
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Personal-use residential real property.(p9)

rule
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 does not 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 does not include a deck or screened-in porch. It also does not 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.
EIC
Personal-use residential real property does not include residential rental property, a residence that contains a home office, or a structure that contains five or more residential units.
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Improvements.(p9)

rule
The cost indexes safe harbor method applies only to three types of improvements on personal-use residential real property.
taxmap/pubs/p976-003.htm#en_us_publink100078120

Damage categories.(p9)

rule
Revenue Procedure 2018-09 provides seven index tables that correspond to each of the categories listed below and information on how to calculate the decrease in the FMV of personal-use residential real property in each of the tables. The tables include the cost per square foot, taking into account the personal residence size or percentage of damage to the residence and the location. The damage categories are:
Special rules apply if you need to use multiple categories. See Revenue Procedure 2018-09.
taxmap/pubs/p976-003.htm#en_us_publink100078121
Total loss of a personal residence.(p9)
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.
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Near total loss of a personal residence.(p9)
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/p976-003.htm#en_us_publink100078123
Structural damage from wind, rain, or debris to a personal residence.(p9)
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/p976-003.htm#en_us_publink100078124
Damage to a detached structure.(p9)
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/p976-003.htm#en_us_publink100078125

Increases to safe harbor loss amount.(p9)

rule
The decrease in the FMV determined under the safe harbor is the full amount of the decrease and cannot be increased by amounts related to items such as landscaping, debris removal, or demolition.
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Decreases to safe harbor loss amount.(p9)

rule
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.
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Reporting requirements on Form 4684.(p10)

rule
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.
For additional information, see Revenue Procedure 2018-09. You may qualify to use other safe harbor methods as well. See Revenue Procedure 2018-08 for more information.
taxmap/pubs/p976-003.htm#en_us_publink100078148

Safe Harbor Methods To Determine the Amount of Your Casualty and Theft Losses(p10)

rule
Revenue Procedure 2018-08, 2018-2 I.R.B. 286, available at IRS.gov/irb/2018-02_IRB#RP-2018-08, provides safe harbor methods that you may use to figure your casualty and theft losses to your personal-use residential property and personal belongings, including some methods applicable only to losses from a federally declared disaster. To figure the amount of your casualty and theft losses, you generally must determine the actual reduction in the FMV of lost or damaged property using a competent appraisal or the cost of repairs you actually make. But the safe harbor methods in Revenue Procedure 2018-08 allow you to determine the decrease in FMV in other ways. The use of a safe harbor method described in Revenue Procedure 2018-08 is not mandatory.
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Personal-use residential real property safe harbor methods.(p10)

rule
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 does not 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 more details, see Revenue Procedure 2018-08.
The safe harbor methods for personal-use residential real property available through Revenue Procedure 2018-08 are the following.
taxmap/pubs/p976-003.htm#en_us_publink100078140
Estimated repair cost method.(p10)
The estimated repair cost safe harbor method allows you to figure the decrease in the FMV of your personal-use residential real property using the lesser of two repair estimates prepared by separate and independent licensed contractors. The estimates must detail the itemized costs to restore your property to its condition immediately before the casualty. The estimated repair cost safe harbor method is limited to casualty losses of $20,000 or less.
taxmap/pubs/p976-003.htm#en_us_publink100078141
De minimis method.(p10)
The de minimis safe harbor method allows you to figure the decrease in the FMV of your personal-use residential real property based on a written good-faith estimate of the cost of repairs required to restore your property to its condition immediately before the casualty. You must keep documentation showing how you estimated the amount of your loss. The de minimis safe harbor method is available for casualty losses of $5,000 or less.
taxmap/pubs/p976-003.htm#en_us_publink100078142
Insurance method.(p10)
The insurance safe harbor method allows you to figure the decrease in the FMV of your personal-use residential real property based upon the estimated loss in reports prepared by your homeowners' or flood insurance company. These reports must set forth the estimated loss you sustained from the damage to or the destruction of your property.
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Federally declared disaster method—Contractor safe harbor.(p10)
If the loss occurred in a disaster area and was due to a federally declared disaster, then you may use the contractor safe harbor method or the disaster loan appraisal method. Under the contractor safe harbor method, you may use the contract price for the repairs specified in a contract prepared by an independent and licensed contractor to determine the decrease in the FMV of your personal-use residential real property. This safe harbor method does not apply unless you are subject to a binding contract signed by you and the contractor setting forth the itemized costs to restore your personal-use residential real property to its condition immediately before the casualty.
taxmap/pubs/p976-003.htm#en_us_publink100078144
Federally declared disaster method—Disaster loan appraisal.(p10)
Under the disaster loan appraisal safe harbor method, you may use an appraisal prepared to obtain a loan of federal funds or a loan guarantee from the federal government that identifies your estimated loss from a federally declared disaster to determine the decrease in the FMV of your personal-use residential real property.
taxmap/pubs/p976-003.htm#en_us_publink100078145

Personal belongings safe harbor methods.(p10)

rule
Personal belongings generally include items of tangible personal property owned by an individual who suffered a casualty or theft loss if they are not used in a trade or business. Personal belongings do not include an item that maintains or increases its value over time or certain other types of property. For more details, see Revenue Procedure 2018-08.
The safe harbor methods for personal belongings are the de minimis method and the replacement cost safe harbor method for federally declared disasters. Under the de minimis method, you can make a good faith estimate of the decrease in the FMV of your personal belongings. You must maintain records describing your affected personal belongings as well as your methodology for estimating your loss. This method is limited to losses of $5,000 or less.
The replacement cost safe harbor method for federally declared disasters allows you to determine the FMV of your personal belongings located in a disaster area immediately before a federally declared disaster to figure the amount of your casualty or theft loss. To use the replacement cost safe harbor method, you must first determine the current cost to replace each of your personal belongings with a new item and then reduce that amount by 10% for each year you have owned each personal belonging. See Personal Belongings Valuation Table in Revenue Procedure 2018-08 in the Replacement Cost Safe Harbor Method. If you choose to use the replacement cost safe harbor method, then you must use that method for all your personal belongings, with certain exceptions identified in Revenue Procedure 2018-08.
Each of these safe harbor methods is subject to additional rules and exceptions. For additional information, see Revenue Procedure 2018-08.
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Decreases to safe harbor loss amount.(p11)

rule
The loss determined through the safe harbor methods 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. Additionally, reduce your loss by the amount of any insurance, reimbursements, or other compensation received.
taxmap/pubs/p976-003.htm#en_us_publink100078147

Reporting requirements on Form 4684.(p11)

rule
Attach a statement to Form 4684 stating that you used Revenue Procedure 2018-08 to determine the amount of your casualty loss. Include the specific safe harbor method used. When completing Form 4684, do not enter an amount on line 5 or line 6 for each property. Instead, enter the decrease in the FMV determined under the relevant safe harbor method on line 7.