When you have items that are lost or damaged as a direct result of a natural disaster, and you live in a federally declared disaster area, you may be able to take a tax deduction for the value of the property that's not covered by your insurance.
The lost or damaged items can be personal property, business property, or investment property.
Not eligible for the deduction:
- Property with progressive deterioration such as termite or moth damage
- Stolen items
- Accidental losses of personal items, such as a ring dropped down the sink
- Property loss or damage of property for personal use or used in performing services as an employee that’s not the direct result of a natural disaster as described previously. (This restriction started in 2018 and applies through 2025)