If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone the gain as explained in Publication 547.
If you have a loss, see Table 27-2.
Loss on deposits.
If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits, earlier.
Casualty loss.
Generally, you can deduct a casualty loss only in the tax year in which the casualty occurred. This is true even if you do not repair or replace the damaged property until a later year.
Disaster area loss.
If you have a casualty loss in a Presidentially declared disaster area, you can choose to deduct the loss on your tax return for either of the following years.
- The year the casualty occurred.
- The year immediately preceding the year the casualty occurred.
Interest abatement on underpayments in disaster areas.
The IRS will abate interest for the length of the extension period granted to all taxpayers who meet both the following requirements.
- They were located in an area declared a disaster area by the President.
- They were granted extensions to file income tax returns and pay income tax.
More information.
For more information, see Disaster Area Losses in Publication 547.
Theft loss.
You can generally deduct a theft loss only in the year you discover your property was stolen. You must be able to show that there was a theft, but you do not have to know when the theft occurred. However, you should show when you discovered that your property was missing.
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