We had a house fire in 2016 and have been arguing with the insurance company. We finally know the loss for personal property. How do we show this on our taxes for 2018?

[Carl]

Was this house a rental property you own? 2nd home? Primary Residence? Something else?

[pattilipson]

Her primary home.  We handled the dwelling in 2016 as that was settled almost immediately.  We have been arguing over values for 2 years on the contents.  We will have a substantial loss on them.

[Carl]

I'm not sure so am flagging @TaxGuyBill on this. But I think losses on personal property are not deductible. However, if the insurance payout was for more than the FMV of the lost items, then the difference is taxable income. I also don't know if you claim that gain on your 2018 tax return since the payout was in 2018, or if you would need to amend your 2016 tax return.
Finally, if the insurance payout was less than the FMV of the lost items at the time of the loss, then I also think you have nothing to report on any tax return.

[TaxGuyBill]

If you have a Casualty Loss (the amount of fire loss that was not paid for insurance) for 2016, you would amend your 2016 tax return to claim that.

However, unless the uninsured loss is large, it is quite possible that it will not lower your taxes.  Casualty Losses for personal-use property an Itemized Deduction that is subject to several limits, so it may not lower you taxes.  However, you can enter the information on the amended return to see the results.  You should be able to type "casualty loss" in the search box in the program to get to that area.
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[Anonymous · Accepted solution]

this is from IRS regulations as to when to deduct casualty loss REG 1.165-1 

(d)Year of deduction.

(1) A loss shall be allowed as a deduction under section 165(a) only for the taxable year in which the loss is sustained. For this purpose, a loss shall be treated as sustained during the taxable year in which the loss occurs as evidenced by closed and completed transactions and as fixed by identifiable events occurring in such taxable year. For provisions relating to situations where a loss attributable to a disaster will be treated as sustained in the taxable year immediately preceding the taxable year in which the disaster actually occurred, see section 165(h) and § 1.165-11.

(2)

(i) If a casualty or other event occurs which may result in a loss and, in the year of such casualty or event, there exists a claim for reimbursement with respect to which there is a reasonable prospect of recovery, no portion of the loss with respect to which reimbursement may be received is sustained, for purposes of section 165, until it can be ascertained with reasonable certainty whether or not such reimbursement will be received. Whether a reasonable prospect of recovery exists with respect to a claim for reimbursement of a loss is a question of fact to be determined upon an examination of all facts and circumstances. Whether or not such reimbursement will be received may be ascertained with reasonable certainty, for example, by a settlement of the claim, by an adjudication of the claim, or by an abandonment of the claim. When a taxpayer claims that the taxable year in which a loss is sustained is fixed by his abandonment of the claim for reimbursement, he must be able to produce objective evidence of his having abandoned the claim, such as the execution of a release.

there is no longer a casualty loss deduction for individuals in 2018

even if you decide that 2016 is the year to report,  your loss if any, is figured based on the lower or cost or Fair Market Value (FMV)  of the property.   If you claim a loss and are audited by the iRS you'll have to prove that the FMV   was in excess of the insurance settlement.