Federal Casualty Loss Deduction Calculator (IRC § 165)

How this calculator works

IRC § 165 allows a taxpayer to deduct certain losses sustained during the tax year — but for individuals, the rules narrowed dramatically after the Tax Cuts and Jobs Act of 2017. The starting point is § 165(a): "There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise." § 165(c)(3) authorizes the personal casualty loss for non-business property — losses arising from fire, storm, shipwreck, or other casualty, or from theft.

Then § 165(h)(5), added by the TCJA in 2017, locked the door: for tax years 2018 through current-law continuation, a personal casualty loss is deductible ONLY if attributable to a federally-declared disaster under § 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. A homeowner whose garage burned down in an isolated electrical fire that was not part of a federal-disaster declaration gets nothing. A homeowner whose property was damaged during Hurricane Helene (DR-4827, 2024), Hurricane Milton (DR-4834, 2024), or the 2025 Southern California wildfires (DR-4856) walks through the full § 165 worksheet.

This calculator models the federal-pure § 165 mechanic for a single casualty event: the basis-vs-FMV-decline lesser-of test under § 165(b), the insurance-reimbursement reduction under § 165(k), the $100 per-event floor under § 165(h)(1), the 10%-of-AGI aggregate floor under § 165(h)(2), the TCJA federally-declared-disaster gate under § 165(h)(5), and a surfaced toggle for the § 165(i) prior-year election.

The § 165(c)(3) TCJA restriction

Before the TCJA, any personal casualty loss qualified — house fire, car accident, vandalism, hurricane, tornado, theft. The taxpayer ran the worksheet, took the deduction, claimed it on Schedule A. The TCJA changed that. Under § 165(h)(5), for tax years 2018+, a personal casualty loss is deductible only if attributable to a federally-declared disaster.

"Federally-declared disaster" means one for which the President has declared a major disaster or emergency under Stafford Act § 401 (42 U.S.C. § 5170). FEMA publishes the authoritative list at fema.gov/disasters — each disaster has a DR-number (e.g., DR-4827 for Hurricane Helene), an incident-period start and end date, and a list of designated counties. The property must be within the designated area and the loss must have occurred during the incident period. A state-of-emergency declaration by a governor is not sufficient.

This restriction is the single most important question to answer before computing anything else. If the answer is no, the deduction is $0 regardless of how large or how real the loss is. The calculator's federally-declared-disaster toggle gates the entire output.

The § 165(b) lesser-of-basis-or-FMV-decline test

For a qualifying loss, § 165(b) defines the starting point: the loss equals the lesser of (a) the taxpayer's adjusted basis in the property under § 1011 or (b) the decline in fair market value caused by the casualty (FMV immediately before minus FMV immediately after).

The basis cap is the rule that surprises most homeowners. A house purchased in 1995 for $200,000 that appreciated to $800,000 by 2024 and was completely destroyed by Hurricane Helene has an $800,000 FMV decline but only a $200,000 basis. The gross loss is $200,000, not $800,000. The appreciation that accumulated over thirty years is irrelevant for the deduction — it would only matter if the property were sold for a taxable gain (where the appreciation would create capital gain, possibly sheltered by § 121's primary-residence exclusion).

Conversely, basis higher than FMV decline limits the loss to the smaller FMV figure. A collector who paid $50,000 for a painting that was worth $20,000 just before a casualty (and $0 after) has a $50,000 basis but only a $20,000 FMV decline — the loss is $20,000.

Cost of repairs as an alternative

Treas. Reg. § 1.165-7(a)(2)(ii) provides a safe harbor: actual restoration repair costs can substitute for the FMV-decline measurement if four conditions are met:

1. The repairs are necessary to restore the property to its pre-loss condition.
2. The amount spent is not excessive.
3. The repairs do not improve the property beyond pre-loss condition (no betterments).
4. The value after repairs does not exceed pre-loss value.

This is often the most practical approach for partial damage — comparable post-loss sales may be unavailable, qualified appraisers may be back-logged for months after a major disaster, and the contractor invoices are concrete and dated. The basis cap still applies; repairs can never produce a deduction larger than the adjusted basis in the damaged asset.

The two floors — $100 and 10% of AGI

Once you have a gross loss, two floors reduce it.

$100 per-event floor (§ 165(h)(1))

The first $100 of each casualty event is non-deductible. The floor applies once per event, not once per damaged item. If Hurricane Helene damaged your roof, your detached garage, your car, and your fencing, those are part of one event with one $100 floor — not four. If you also had a separate kitchen-fire event during the same tax year, that second event gets its own $100 floor.

10% of AGI aggregate floor (§ 165(h)(2)(A))

After each event has been individually reduced by its own $100 floor and any insurance reimbursement, the sum of all qualified personal casualty losses for the year is reduced by 10% of the taxpayer's adjusted gross income. The 10% floor applies to the aggregate, not to each event separately.

A taxpayer with $150,000 of AGI and a $50,000 net loss (after insurance) from a single event:

• After $100 floor: $49,900.
• 10% AGI floor: $15,000.
• Deductible: $49,900 minus $15,000 equals $34,900.

The 10% AGI floor is the bigger barrier in practice. A taxpayer with $300,000 of AGI faces a $30,000 floor — meaning a moderate $25,000 net loss yields no deduction at all.

The § 165(k) insurance reimbursement reduction

§ 165(k) requires that any insurance proceeds (or other compensation) be subtracted from the gross loss before the floors. This includes homeowners insurance, flood insurance through NFIP, separately-purchased wind or hurricane coverage, vehicle insurance, and FEMA individual-assistance grants to the extent they cover items also covered by insurance.

If you have a claim still pending at the time you file, use your best estimate of the expected reimbursement. The IRS expects taxpayers to amend the return if the eventual reimbursement differs materially from the estimate. Treating a denied or disputed claim as $0 reimbursement is permissible if you can substantiate the denial.

Over-insured? You have a § 1033 gain, not a loss.

If insurance reimbursement exceeds the lesser of basis or FMV decline, the taxpayer has an involuntary-conversion gain under IRC § 1033, not a deductible loss. Insurance proceeds in excess of basis are taxable gain — typically long-term capital gain if the property was held more than one year.

§ 1033 allows DEFERRAL of the gain if you reinvest the proceeds in qualifying replacement property within the replacement period:

• Generally 2 years from the end of the year you received the proceeds.
• 4 years for a principal residence damaged by casualty.
• 5 years for property in certain federally-declared-disaster areas.

The replacement property must be similar or related in service or use. For a destroyed primary residence, § 121's $250K / $500K exclusion may also shelter some or all of the gain. The calculator flags the gain case but does not compute § 1033 — consult a CPA.

The § 165(i) prior-year election

§ 165(i) lets a taxpayer ELECT to claim a federally-declared-disaster loss on the return for the year IMMEDIATELY PRECEDING the loss year. A loss sustained in October 2024 from Hurricane Milton can be claimed on the 2023 return via Form 1040-X.

When the election helps:

1. Higher prior-year marginal bracket. Each dollar of deduction saves more federal tax in a higher-bracket year.
2. Lower prior-year AGI. Less of the loss is consumed by the 10% AGI floor.
3. Refund timing. The IRS expedites disaster-related amended returns — taxpayers can receive the refund within weeks instead of waiting until the loss-year return is filed the following April.

The election must be made by the later of (a) the extended due date of the loss-year return or (b) six months after the original due date of the prior-year return. The election is irrevocable for the loss.

Worked example 1 — Hurricane Helene homeowner, Florida

A Florida homeowner had a primary residence worth $500,000 before Hurricane Helene (FMV from the most recent appraisal) and $200,000 after (post-storm appraisal — the structure was substantially damaged, the lot retained most of its value). Adjusted basis is $350,000 (purchased in 2015 for $280K plus $70K of capital improvements). Insurance paid out $150,000 under the windstorm rider. AGI is $100,000.

• FMV decline: $500,000 minus $200,000 equals $300,000.
• Basis: $350,000.
• Gross loss under § 165(b): min($350,000, $300,000) equals $300,000.
• After § 165(k) insurance reimbursement: $300,000 minus $150,000 equals $150,000.
• After § 165(h)(1) $100 per-event floor: $149,900.
• 10% AGI floor: $100,000 times 10% equals $10,000.
• Deductible: $149,900 minus $10,000 equals $139,900.

At a 22% marginal bracket, the deduction saves roughly $30,778 in federal tax.

Worked example 2 — North Carolina mountain cabin, Helene

A cabin in the Asheville area, purchased in 1994 for $150,000, appreciated to a pre-loss FMV of $800,000 and was reduced to $100,000 post-Helene (severe flooding, foundation damage). No insurance — the property was paid off and the owner self-insured. AGI $90,000.

• FMV decline: $700,000.
• Basis: $150,000.
• Gross loss: min($150,000, $700,000) equals $150,000. The thirty years of appreciation are not recoverable — the deduction is capped at original cost basis plus capital improvements.
• After insurance: $150,000.
• After $100 floor: $149,900.
• 10% AGI floor: $9,000.
• Deductible: $140,900.

The lesson is brutal but clear: for long-held appreciated property, the basis cap limits the casualty deduction to a fraction of the economic loss.

Worked example 3 — Hurricane Milton, partial damage with cost-of-repairs safe harbor

A Florida homeowner sustained partial roof and interior damage from Milton. Pre-loss FMV $500,000, post-loss FMV $380,000 (FMV decline $120,000). The roofer's invoice for restoration repairs was $90,000, with photographs and itemized line items proving the repairs restored — but did not improve — the property. Adjusted basis $300,000. Insurance $50,000. AGI $120,000.

Using the cost-of-repairs safe harbor instead of FMV decline:

• Fmv decline (using repairs as proxy): $90,000.
• Basis: $300,000.
• Gross loss: min($300,000, $90,000) equals $90,000.
• After insurance: $40,000.
• After $100 floor: $39,900.
• 10% AGI floor: $12,000.
• Deductible: $27,900.

Using the cost-of-repairs alternative ($90,000) yielded a smaller gross loss than the FMV-decline method would have ($120,000) — so the homeowner would actually prefer to use the FMV-decline method here, assuming it can be substantiated with a qualified appraisal. The calculator surfaces both paths; in practice, the taxpayer chooses the method that produces the larger qualifying loss, subject to substantiation.

Worked example 4 — California wildfires, over-insured

A Palisades-area home destroyed in the 2025 Southern California wildfires (DR-4856). Pre-loss FMV $3,000,000, post-loss FMV $0 (total loss). Adjusted basis $1,200,000. Insurance paid out $1,000,000 (the owner was under-insured relative to FMV but adequately insured relative to basis). AGI $400,000.

• FMV decline: $3,000,000.
• Basis: $1,200,000.
• Gross loss: $1,200,000.
• After insurance: $200,000.
• After $100 floor: $199,900.
• 10% AGI floor: $40,000.
• Deductible: $159,900.

At a 35% marginal bracket, the deduction saves about $55,965 in federal tax. The homeowner should also evaluate whether the prior-year (2024) AGI and bracket support a § 165(i) election.

Worked example 5 — Eaton fire, over-insured = § 1033 gain

Same disaster, different facts. A home destroyed in the Eaton fire (also part of DR-4856) had pre-loss FMV $1,500,000, post-loss FMV $0, adjusted basis $400,000 (long-held property), insurance payout $1,200,000, AGI $500,000.

• Gross loss: min($400,000, $1,500,000) equals $400,000.
• Insurance reimbursement ($1,200,000) exceeds the gross loss.
• This is a § 1033 involuntary-conversion gain of $800,000 ($1.2M minus $400K basis), not a deductible loss.
• Deductible casualty loss: $0.
• Planning move: reinvest the $1.2M in qualifying replacement property within 4 years (principal residence) or 5 years (federally-declared disaster area) to defer the $800K gain. If selling the lot rather than rebuilding, the § 121 $250K (single) or $500K (MFJ) exclusion may shelter some or all of the gain.

Stafford Act § 401 and the FEMA disaster lookup

Before claiming any post-2017 personal casualty loss, verify the disaster against FEMA's authoritative list at fema.gov/disasters. Confirm three things:

1. The disaster has a DR-number. "Federally-declared" means a Stafford-Act § 401 major disaster declaration with an assigned DR-number. A FEMA "emergency" declaration with an EM-number is a different (lesser) category that may or may not trigger § 165(h)(5) eligibility — check the specific declaration text.
2. Your property's county is on the designated list. A disaster declaration typically covers specific counties, not an entire state. Property in an adjacent county may not qualify even if affected by the same storm.
3. The damage occurred during the incident period. Each declaration has start and end dates. Damage outside the window does not qualify under that declaration.

Recent qualifying disasters:

• Hurricane Helene (DR-4827, declared September 28, 2024) — Florida, Georgia, North Carolina, South Carolina, Tennessee, Virginia.
• Hurricane Milton (DR-4834, declared October 10, 2024) — Florida.
• Southern California wildfires (DR-4856, declared January 2025) — Los Angeles County (Palisades, Eaton).
• Hurricane Debby (DR-4806, 2024) — Florida, Georgia, South Carolina, North Carolina, Vermont.
• Maui wildfires (DR-4724, August 10, 2023) — Hawaii.

Form 4684 and Schedule A

Report the casualty loss on IRS Form 4684 (Casualties and Thefts). Section A is for personal-use property; Section B is for business or income-producing property (different mechanics — no $100 or 10%-AGI floors, no federally-declared-disaster restriction).

Form 4684 walks through the Pub. 547 worksheet:

1. Identify each damaged item and its adjusted basis.
2. Compute pre-loss and post-loss FMV (or use cost-of-repairs safe harbor).
3. Compute the gross loss per item (lesser of basis or FMV decline).
4. Aggregate across items within an event; subtract insurance reimbursement.
5. Apply the $100 floor per event.
6. Aggregate after-$100-floor amounts across all events.
7. Apply the 10% AGI floor.
8. The result flows to Schedule A line 15 (itemized deductions).

Critical: the deduction is only useful if you ITEMIZE. With the TCJA's near-doubling of the standard deduction ($15,750 single / $31,500 MFJ for 2026 under current-law continuation), many taxpayers no longer itemize even after a major casualty. Some disaster-specific legislation (e.g., the Federal Disaster Tax Relief Act of 2023) has historically allowed certain hurricane losses to be added to the standard deduction directly — check whether your specific disaster qualifies for a stand-alone provision.

Include the FEMA disaster number (the four-digit DR-number) on Form 4684 — the IRS is increasingly automating verification against the FEMA list.

Common errors

• Claiming a non-federally-declared loss for tax years 2018+. The TCJA gate under § 165(h)(5) is absolute. The deduction is zero, regardless of how real or how large the loss is.
• Double-counting insurance reimbursement (listing the gross loss in one place and the after-reimbursement loss in another).
• Forgetting the basis cap. Most common when long-held property has appreciated dramatically; the FMV decline is irrelevant if it exceeds basis.
• Reversing the lesser-of test (claiming the larger of basis or FMV decline instead of the smaller).
• Applying the $100 floor per item rather than per event.
• Using a year-end FMV figure rather than an immediately-pre-loss FMV figure.
• Failing one of the four cost-of-repairs safe harbor conditions (necessary, not excessive, no betterments, post-repair value not above pre-loss).
• Missing the § 165(i) prior-year election deadline when the prior year would have produced a larger benefit.
• Failing to confirm the FEMA disaster number AND the property's location within the federally-designated affected area.
• Itemizing the casualty loss when total itemized deductions are below the standard deduction (the deduction produces no tax benefit).
• Treating a § 1033 over-insurance gain as a loss. Insurance in excess of basis is a taxable gain, not a deductible loss.

Statute citations

• IRC § 165(a) — general loss deduction
• IRC § 165(b) — basis limitation (loss limited to adjusted basis)
• IRC § 165(c)(3) — personal casualty and theft losses
• IRC § 165(h)(1) — $100 per-event floor
• IRC § 165(h)(2)(A) — 10% of AGI aggregate floor
• IRC § 165(h)(5) — TCJA federally-declared-disaster requirement (post-2017)
• IRC § 165(i) — election to claim federally-declared-disaster loss in prior year
• IRC § 165(k) — insurance-reimbursement reduction
• Treas. Reg. § 1.165-1 through § 1.165-11 — implementing rules
• Treas. Reg. § 1.165-7 — casualty losses (basis vs FMV test, cost-of-repairs safe harbor)
• Stafford Act § 401 (42 U.S.C. § 5170) — major disaster declaration
• IRS Publication 547 — Casualties, Disasters, and Thefts
• IRS Form 4684 — Casualties and Thefts
• Pub. L. 115-97 § 11044 (TCJA 2017) — enacted § 165(h)(5)

Important caveats

This is a planning tool, not legal or tax advice. It models a single casualty event; multiple-event aggregation requires summing per-event after-$100-floor values before applying the 10% AGI floor. It does not model business casualty losses (different mechanics, no $100 or 10% AGI floors, no federally-declared-disaster restriction). It does not compute § 1033 involuntary-conversion gain deferral when insurance exceeds basis. It does not validate Stafford-Act eligibility against FEMA's database — the user attests to the federally-declared status. It does not compute the standard-deduction-vs-itemized tradeoff. The federally-declared-disaster gate reflects current law (TCJA continuation); legislative monitoring is recommended for tax years past the calculator's last-reviewed date. Consult a CPA before filing.