Life is full of ups and downs, and there is no way of predicting when you will suddenly find yourself in a bad situation. However, there is at least one up side to disaster; most can be counted as casualty losses or deductions on your taxes. While you won’t get all the money back you lost, for major losses, it is worth claiming the deduction.
Money doesn’t replace everything that has been lost in a disaster, but it can help you rebuild. There are certain requirements defined by the IRS that must be met for your loss to be claimed as a deduction. The IRS considers a casualty loss to be “the damage, destruction or loss of property resulting from a sudden, unexpected or unusual event.” Losses are not limited to those caused by natural disasters, there are also certain circumstances such as robbery or theft that are considered casualty losses. Other examples of what the IRS considers a claimable casualty loss are: floods, hurricanes, tornadoes, fires, earthquakes, ice storms, blizzards, vandalism, drought, and mudslides. Natural causes for loss are not considered claimable. Such things as lost property, termite damage or damage caused by neglect will not be accepted.
For certain situations the casualty loss deduction is given without following all of the rules. For example if someone experienced loss in a Presidential declared disaster area, the victims can claim losses in the same year as the disaster. For all other people the deduction must be claimed the following year.