Casualty loss in California

[Banjer]

Taxpayer has loss from water damage in 2024 due to a leak in a neighbor's condo, in California. Tens of thousands of dollars in damages after insurance. This is not related to any declared disaster by the President or Governor. 

1. TurboTax tells me that this is not deductible for Federal but IS deductible for California state taxes. The Franchise Tax Board's website seems to suggest that California follows the Federal practice of looking to declared disasters: https://www.ftb.ca.gov/file/business/deductions/disaster-loss.html  Is there a distinction in California taxes between a "disaster" loss and a run-of-the-mill "casualty" loss?

2. If it is indeed deducible in California, does that mean that there will be a difference in cost basis (with basis reduced for the casualty deduction for California taxes, but not for Federal taxes)?

3. Taxpayer plans to sell this condo in 2025. Is there ever a good strategic reason NOT to declare the casualty loss (maybe to preserve the basis to reduce capital gains taxes in 2025, or some other reason)?

[MinhT1]

The instructions for CA form 540 say:

California allows personal casualty and theft loss and disaster loss deductions. If you have personal casualty and theft loss and/or disaster loss, complete another federal Form 4684, Casualties and Thefts, using California amounts. Enter the difference between the federal and California amount in column B or column C.

If you can claim a casualty loss in CA, then the cost basis for your property in CA will be lower than its cost basis for Federal tax purposes.

[Edited 04/06/25 | 9:04 AM PST]

@Banjer  I have edited my answer

[Banjer]

But TurboTax is saying that the taxpayer in this situation gets a casualty loss for California taxes but not for Federal taxes. So there must be a legal difference in this case unless TurboTax is wrong (which would surprise me).

I am still interested in the question of basis: would the taxpayer have different cost basis for California taxes than for Federal, if they take the casualty loss on California taxes but not Federal?

[MinhT1]

If you can claim a casualty loss in CA, then the cost basis for your property in CA will be lower than its cost basis for Federal tax purposes.