Reduce Taxes through Reporting of Property Destruction

Reduce Taxes through Reporting of Property Destruction

The "One Big Beautiful Bill," signed into law in July 2025, expands the eligibility for federal income tax deductions for property damage to include certain state-declared disasters, following the rules established by the Federal Disaster Relief Act of 2023.

To support a claim for a loss due to a disaster, one should gather before and after photos, receipts, canceled checks, deeds, and professional appraisals. For federally declared disasters, taxpayers can elect to deduct the loss on either the tax return for the year the disaster occurred or the prior tax year, providing some flexibility.

The Adjusted Gross Income (AGI) is calculated by subtracting qualifying deductions from gross income, which includes wages/salary, dividends, capital gains, taxable interest, IRA and/or pension or annuity distributions, alimony, unemployment compensation, business income or loss, farm income or loss, rental real estate, royalties, partnerships, S corporations, trusts, taxable Social Security benefits, and other income.

Qualifying deductions also include IRA contributions, student loan interest, tuition and fees deductions, educator expenses, Health Savings Account deductions, half of the self-employment tax, contributions to health insurance, penalties for early withdrawal from savings and qualified retirement plans, paid alimony, and moving expenses.

For tax years 2018 through 2025, deductible casualty and theft losses for individuals are limited to those caused by federally declared major disasters, such as storms, floods, fires, and other similar events officially recognized by the federal government. This means that losses from natural disasters, theft, vandalism, or accidents are generally deductible, but only if they result from a federally declared disaster (except for theft or certain cases).

Personal use property, such as your car or home furniture, that is damaged or destroyed is eligible for a deduction. Business or income-producing property has separate rules but is generally deductible under business loss provisions. Theft or vandalism losses are deductible if the property was stolen or intentionally damaged, but the rules require documentation and timely insurance claims for reimbursement. Losses from accidents can also be deductible if sudden and unexpected (casualty losses).

You can only deduct the unreimbursed portion of your loss. The IRS requires filing a timely insurance claim; failure to file can limit the deduction to just the insurance deductible or a smaller amount. The deductible amount is generally the lesser of the adjusted basis (usually purchase price less depreciation, for business property), or the decrease in fair market value (FMV) of the property due to the casualty, minus any insurance or other reimbursements.

If you have personal casualty gains and losses in the same year, the losses may offset gains to the extent the losses do not exceed the gains, regardless of the disaster declaration. The "One Big Beautiful Bill" makes it possible to claim a disaster loss as a standard deduction instead of an itemized deduction.

This framework is the most current based on IRS guidelines through 2025. For any property used in a business or producing income, additional tax provisions and depreciation rules apply. The "One Big Beautiful Bill" signed into law in July 2025 extends the rules from the Federal Disaster Relief Act of 2023 to disasters that occurred on or before July 4, 2025, and are declared within 60 days of July 4, 2025.

[1] Internal Revenue Service. (n.d.). Publication 547 - Casualties, Disasters, and Thefts. Retrieved from https://www.irs.gov/publications/p547 [2] Internal Revenue Service. (n.d.). Instructions for Form 4684 - Casualties and Thefts. Retrieved from https://www.irs.gov/forms-pubs/about-form-4684 [3] Internal Revenue Service. (n.d.). Publication 535 - Business Expenses. Retrieved from https://www.irs.gov/publications/p535 [4] Internal Revenue Service. (n.d.). Notice 2023-30 - Temporary and Final Guidance on Casualty Losses under the Tax Cuts and Jobs Act. Retrieved from https://www.irs.gov/pub/irs-drop/n-23-30.pdf

1. In the event of a personal disaster loss, one can consider including the unreimbursed expenses from ico mining equipment, if the related equipment was damaged or destroyed during the disaster and meets the IRS qualifications for a casualty loss.
2. For those investing in personal-finance endeavors, such as ico mining, it's essential to understand and document the potential tax implications of such losses due to natural disasters, theft, or vandalism, provided these events are part of a federally declared disaster.

Read also: