@Jemar. It depends. In the eyes of the tax code, it is not as simple as that. To be able to claim loss on the property, you must first dispose of the property. A disposition occurs when you either sell it or get rid of it as completely worthless. Once the disposition occurs, if the disposition price is less than the remaining value of the property, then, yes, there would be a deductible loss on a property held as a rental venture. If the property was a personal property, then no loss can be claimed on the tax return.
And the situation is further complicated by the rules for recapturing depreciation. For instance, let's say you began renting the home when it had a value of $100,000, and due to damage you can only sell the home for $30,000. You might think that your loss is $70,000, but not so! If in the years you were renting the home, the depreciation allowable was $50,000, then the loss you can claim is $20,000, even if you never took the depreciation itself. Now, if you have expenses like air sampling and other mold-remediation efforts in connection with the property sale, these can be re-added to the basis of the home, and the loss will increase by these expenses.
But what you describe in your comment is in fact a repair. The house is damaged by the mold, and all of the expenses involved in remediating the mold (not covered by insurance) would be deductible as repairs (not a remodel) if the purpose is to restore the home to it's original value. These expenses would not need to be depreciated for a rental home. However, as @Opus17 states, in a personal residence, these expenses are not deductible as loss.
A remodel occurs when changes are made to the home that can improve it's value. Painting a room to simply brighten it up or to repair faded or marked-up walls in and of itself is a repair. However, painting your walls as part of a kitchen overhaul is a remodel, which must be depreciated in a rental home.
This TurboTax Help Article can assist to enter a rental property disposition: I sold my rental property. How do I report that?
I hope this is helpful.
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