What’s New: Limitation on personal casualty and theft losses. Personal casualty and theft losses of an individual are deductible only to the extent they're attributable to a federally declared disaster. The loss deduction is subject to the $100 limit per casualty and 10% of your adjusted gross income (AGI) limitation. An exception to the rule above limiting the personal casualty and theft loss deduction to losses incurred in a federally declared disaster applies if you have personal casualty gains for the tax year. In this case, you will reduce your personal casualty gains by any casualty losses not attributable to a federally declared disaster. Any excess gain is used to reduce losses from a federally declared disaster. The 10% AGI limitation is applied to any federal disaster losses that remain. For more information, see Disaster Losses, later, the instructions for Line 14 of Form 4684, and Pub. 547.
Losses You Can Deduct
You can deduct losses of property from fire, storm, shipwreck, or other casualty, or theft are deductible only if the loss is attributable to a Federally decalared disaster. See Pub. 547, Casualties, Disasters, and Thefts, for more examples.
If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Otherwise, you can't deduct the loss as a casualty or theft loss. However, the part of the loss that isn't covered by insurance is still deductible.
Related expenses. The related expenses you have due to a casualty or theft, such as expenses for the treatment of personal injuries or for the rental of a car, aren't deductible as casualty or theft losses.
Costs for protection against future casualties aren't deductible but should be capitalized as permanent improvements. An example would be the cost of a levee to stop flooding.
Losses You Can't Deduct
Money or property misplaced or lost may not be deducted as a theft loss.
Breakage of china, glassware, furniture, and similar items under normal conditions.
Progressive damage to property (buildings, clothes, trees, etc.) caused by termites, moths, other insects, or disease.
A decline in market value of stock, caused by disclosure of accounting or other illegal misconduct by the officers or directors of the corporation that issues the stock, that was acquired on the open market for investment. You may be able to deduct it as a capital loss on Schedule D (Form 1040) if the stock is sold or exchanged or becomes completely worthless. See chapter 4 of Pub. 550, Investment Income and Expenses.
Note. Victims of fraudulent investment schemes can claim a theft loss deduction if certain conditions apply. See Losses From Ponzi-Type Investment Schemes, later, for more information.