Form 4684 is how you report casualty and theft gains or losses and compute the deductible amount that flows to your return.
Right up front, one rule shapes everything for individuals in 2018 through 2025. A personal‑use loss is deductible only if it is tied to a federally declared disaster. There is an exception if you have personal casualty gains, and there are special “qualified disaster loss” rules that relax the usual limits for certain disasters declared through early 2025. I will flag those below so you do not miss them.
Key takeaways
- Personal‑use losses are deductible in 2018–2025 only if the loss is attributable to a federally declared disaster, unless you are netting against casualty gains. Keep the FEMA declaration number with your records.
- Qualified disaster losses for disasters declared between January 1, 2020 and February 10, 2025, with specific incident‑period dates, can be deducted without itemizing, the per‑casualty reduction is 500 instead of 100, and the 10% of AGI floor does not apply.
- Use Section A for personal‑use property, Section B for business or income‑producing property, Section C for theft losses from a Ponzi‑type investment scheme, and Section D to elect to claim a federal disaster loss on the prior year or to revoke that election.
- Calculate your loss as the smaller of adjusted basis or the decrease in fair market value, then reduce by insurance and other reimbursements. Personal losses usually face the 100 reduction per event and the 10% of AGI rule unless qualified‑disaster relief applies.
- Document everything, photos before and after, adjuster reports, police reports for theft, receipts proving basis, and the FEMA number if applicable.
What is IRS Form 4684
At its core, Form 4684 turns a damaged or stolen asset into numbers the IRS recognizes. You determine your adjusted basis, measure the decrease in fair market value, subtract salvage and reimbursements, and apply the personal loss limits if they apply to you. The output routes to Schedule A, Schedule D, or Form 4797 depending on the property and whether you have a net gain or loss.
- Section A, personal‑use property, is where most homeowners start. For 2018–2025, you only deduct a personal loss if the event is a federally declared disaster. You will enter the FEMA declaration number when applicable.
- Section B covers trade, business, rental, and royalty property, which are not subject to the $100 and 10% of AGI personal limits. Results flow to Schedule A for income‑producing property or to Form 4797 for trade or business property.
- Section C is a specialized path for theft losses from Ponzi‑type schemes using Revenue Procedure 2009‑20. If you are not in that scenario, you will skip Section C.
- Section D lets you elect to claim a federally declared disaster loss on the prior year’s return, or revoke that election within the IRS time window.
If you suffered a qualified disaster loss, you can claim it without itemizing, the $100 reduction becomes $500, and the 10% of AGI rule does not apply, for disasters declared in the IRS date window.
Why this matters right now
Disasters are common, and the numbers are sobering. In 2023, the United States saw a record 28 billion‑dollar weather and climate disasters with about 92.9 billion in damage. That scale of loss is exactly why Form 4684 exists, and why accurate documentation and correct filing can make a real difference for your recovery.
Who should use Form 4684
If you experienced a sudden event or a theft that damaged or destroyed property, you likely need Form 4684. That includes individuals, landlords, and business owners.
Eligible taxpayers and events
- Individuals with personal‑use property losses from a federally declared disaster, for example a hurricane, wildfire, flood, or severe storm that FEMA lists under a presidential declaration.
- Owners of trade, business, rental, or royalty property with casualty or theft losses, which are calculated on Section B and are not subject to the personal $100 and 10% of AGI limits.
- Taxpayers with theft losses, larceny, embezzlement, burglary, robbery, provided the taking was illegal under state law and done with criminal intent. Keep the police report.
You generally claim a casualty loss in the year the event happened, and a theft loss in the year you discovered it.
When to file, and which year to use
Timing rules are simple once you know the triggers.
- Casualty losses are claimed in the year the casualty occurred.
- Theft losses are claimed in the year you discover the theft.
- Federal disaster losses may be elected on the prior year’s return, which can speed up a refund. You make or revoke that election with Section D, and the IRS has precise deadlines for revoking.
Keep an eye on reimbursements. If you have a claim with a reasonable prospect of recovery, you generally wait to deduct that portion until you know whether you will be paid. If you later recover money for a previously deducted loss, you may have to include the recovery in income under the tax‑benefit rule.
Special rules for qualified disaster losses
Congress has extended relief for certain disasters. For individuals, a qualified disaster loss includes personal‑use property losses attributable to major disasters declared during a specific window. For current returns, the IRS says a qualified disaster loss includes disasters declared between January 1, 2020 and February 10, 2025, with incident periods that began on or after December 28, 2019, ended no later than January 11, 2025, and meet the other criteria.
Why you care:
- You can claim the deduction without itemizing.
- The per‑casualty reduction is 500 instead of 100.
- The 10% of AGI floor does not apply to the net qualified disaster loss.
- You still must reduce by insurance or other reimbursements, and you must include the FEMA declaration.
If you do not fall in that qualified window, the regular personal rules apply, you must itemize, reduce by 100 per event, and your total federal disaster losses must exceed 10% of AGI. Business or rental property follows Section B and different reporting.
Quick map of where results flow
- Personal‑use loss, Section A, after limits, usually goes to Schedule A, line 15 or line 16 depending on qualified‑disaster treatment.
- Business or income‑producing property, Section B, flows to Form 4797 for trade or business and to Schedule A for income‑producing property.
- Net personal casualty gains can trigger Schedule D reporting. The form prompts you when to send gains to capital gains schedules.
Use one Form 4684 per event for Section A through line 12, then combine on a single form for lines 13–18 to apply the personal limits correctly.
What counts, what does not
Your first task is classification. The IRS draws a bright line between sudden events and slow deterioration.
Casualty versus theft, in practice
- Casualty, a sudden, unexpected, unusual event such as a fire, hurricane, tornado, earthquake, or vandalism.
- Theft, an illegal taking with criminal intent, like burglary, robbery, larceny, or embezzlement. You do not need a conviction, but you need credible proof.
For personal‑use property in 2018–2025, a loss is deductible only if it is from a federally declared disaster, unless you are netting against casualty gains. Business and income‑producing property losses are still reported on Form 4684 without the personal $100 and 10% rules.
Progressive deterioration exclusions
Ongoing problems do not qualify. Termites, rust, rot, mold, gradual water seepage, and normal wear break things over time, they are not sudden casualties. Routine breakage, like a dropped plate, also fails the test.
Simple “does it qualify” table
| Situation | Deductible on Form 4684? |
| Windstorm in a federally declared disaster damages your roof | Yes, Section A (personal) or Section B (business) |
| Theft with police report and credible evidence | Yes, as theft loss |
| Ordinary breakage of household items | No |
| Gradual damage, termites, rust, long‑term leaks | No |
| Flood not in a federal disaster area, personal use | Only to offset personal casualty gains |
Source guidance, IRS Pub. 547.
Losses on bank deposits, updated treatment
Losses on deposits in an insolvent or bankrupt financial institution are no longer claimed as a personal casualty deduction, except to the extent they offset personal casualty gains. Otherwise, they are generally treated as a nonbusiness bad debt and reported on Form 8949 and Schedule D in the year the loss becomes certain. Pub. 547 explains both routes.
Ponzi‑type schemes have their own lane
If you are a victim of a Ponzi‑type investment scheme, Section C of Form 4684 provides a streamlined method under Revenue Procedure 2009‑20 to compute a theft loss. You will enter your total qualified investment, expected recovery factors, and then carry the result into Section B. This is a specialized path, so use it only if your facts match the revenue procedure.
Many older summaries still say Section C is for bank failures. Today’s Form 4684 uses Section C for Ponzi‑type theft losses, and Section D for disaster year elections. Always check the current form.
Documentation that makes your deduction stick
From experience, good records shorten IRS questions and reviewer time. Build a simple file for each event.
- FEMA declaration number and the disaster name for federal disasters.
- Police report for theft, insurance claim file, adjuster’s report, settlement letters, and canceled checks.
- Proof of adjusted basis, purchase invoices, closing statements, and improvement records.
- Pre‑ and post‑loss photos, appraisals, and contractor estimates showing the damage and value change.
- Notes on expected insurance recovery, and later letters if the final payment differs.
If originals were destroyed, rebuild with third‑party statements, property tax records, bank statements, and a written explanation of what happened and when.
How to calculate your loss, step by step
Start with two numbers, adjusted basis and the decrease in fair market value caused by the event. Your tentative loss is the smaller of those two, reduced by reimbursements and salvage. Personal losses then face the $100 or $500 reduction and possibly the 10% of AGI rule.
Worked example, personal‑use property in a federal disaster
- You bought your home years ago. Your adjusted basis in the damaged property before the storm is 18,500, and its value dropped from 17,000 to 200 after the event. You had no insurance. Your AGI is 70,000.
- Compute on Section A: the smaller of basis or value decrease is 16,800, less reimbursements 0, less the 100 reduction, then subtract 10% of AGI which is 7,000. Your deductible casualty loss is 9,700. This mirrors the IRS example.
On the form, Section A lines 2–9 capture basis, reimbursements, and the value drop, line 11 applies the 100 or 500 reduction, and lines 13–18 handle combining events and applying the 10% of AGI rule. If you only have qualified disaster losses within the IRS window, you may bypass the 10% floor and use 500 on line 11, then report the amount on Schedule A even if you do not itemize, using the special “Net Qualified Disaster Loss” notation.
Worked example, business property
- Your rental property’s roof is destroyed. Adjusted basis component at issue is 25,000, value drop is 22,000, insurance paid 15,000.
- In Section B, your loss is the smaller of basis or value drop, 22,000, minus the 15,000 reimbursement, so 7,000. There is no 100 reduction and no 10% of AGI floor for business or rental property. Depending on holding period and type, results flow to Schedule A for income‑producing property or to Form 4797 for trade or business.
Tip, if property is totally destroyed or stolen, Section B tells you to use adjusted basis on line 26. That simplifies the math but you still reduce by reimbursements.
Insurance, reimbursements, and timing rules
File insurance claims promptly. If you have a reasonable prospect of recovery, you generally cannot deduct that portion yet. When the final settlement arrives, reduce your loss by what you received or reasonably expect to receive. If you later recover more after you already claimed a deduction, the tax‑benefit rule may require including part of that recovery in income. Keep a note in your file with dates, amounts, and the claim number.
- Personal losses in 2018–2025 must be tied to a federally declared disaster to be deductible, unless you are offsetting personal casualty gains.
- Qualified disaster losses in the IRS window can be deducted without itemizing, the 100 becomes 500, and the 10% of AGI floor is waived. Follow the specific reporting on Schedule A the instructions describe.
Special rules for federally declared disasters
Section D lets you elect to claim a federal disaster loss on the prior year’s return, which can unlock a faster refund. If you change your mind, Part II of Section D sets out how to revoke the election, including the 90‑day timing rule. You will list the disaster name, the date of loss, and the property address.
If your home was ordered unsafe by local officials within 120 days of the disaster declaration, the loss in value from tearing down or moving the home is treated as a disaster loss.
Where to report and common filing pointers
- Section A personal losses, after lines 13–18, go to Schedule A. If all your losses are qualified disaster losses within the IRS window, follow the “increased standard deduction” reporting so you can claim the loss without itemizing.
- Section B business and income‑producing property flows to Form 4797 for trade or business, and to Schedule A for income‑producing property. Gains can pull in Schedule D. The form lines show exactly where to send each number.
- Section C applies only to Ponzi‑type theft losses under Rev. Proc. 2009‑20.
- Always include the FEMA declaration number for federal disasters, and keep appraisals, adjuster reports, and photos with your tax file.
A quick note for busy accounting teams
If your firm is buried during disaster seasons and Form 4684 reviews keep slipping, you are not alone. Many firms do not struggle to find clients, they struggle to deliver consistent, on‑time work at quality when workload spikes. Accountably integrates trained offshore teams into your workflow with SOPs, structured workpapers, and layered reviews so your partners spend less time stuck in review and more time with clients. Use it where it makes sense, for example workpaper prep, tie‑outs, and standardized Section A and B reviews, and keep ownership of your process, security, and standards.
FAQs
What is IRS Form 4684
It is the form for reporting gains and losses from casualties and thefts and for computing the deductible amount that flows to your return. Sections A through D handle personal losses, business or rental property, Ponzi‑type theft losses, and the prior‑year disaster election.
What qualifies as a deductible casualty loss in 2018–2025
For individuals, a personal‑use casualty or theft loss is deductible only if it is attributable to a federally declared disaster, unless you are offsetting casualty gains. You still must reduce by insurance and apply the $100 and 10% of AGI rules, unless you meet the qualified disaster window that switches those rules to $500 and no 10% floor.
Can I claim a qualified disaster loss without itemizing
Yes, if your loss meets the IRS qualified disaster definition for declarations between January 1, 2020 and February 10, 2025 with the required incident‑period dates. You will follow the instructions to show “Net Qualified Disaster Loss” on Schedule A with your standard deduction.
How do I document my loss
Keep the FEMA number, police report for theft, photos before and after, appraisals or contractor estimates, insurance claim and settlement papers, and proof of basis like receipts and closing statements. Good documentation is the difference between a smooth review and a long back‑and‑forth.
What if my bank failed and my deposits were lost
You generally cannot claim an ordinary personal casualty deduction for a deposit loss. You may treat it as a casualty only to offset personal casualty gains, or treat it as a nonbusiness bad debt when the loss becomes certain, reported on Form 8949 and Schedule D.
Can I claim the disaster on last year’s return
Yes, federal disaster losses can be elected on the prior year. Use Section D for the election, and Part II if you need to revoke it within the IRS time window. Follow the instructions and include the disaster name, dates, and property address.
Closing thoughts and next steps
You now know when Form 4684 applies, how to calculate losses, and where to report them. If your loss is tied to a federally declared disaster, the rules are more generous within the IRS qualified‑disaster window. If not, you may still get relief, especially for business or rental property. Either way, build a clean file, verify your FEMA details, and match your entries to the form lines so your numbers stand up to review. For a sense of scale, the U.S. faced 28 billion‑dollar disasters in 2023 and about 92.9 billion in damage, which is why careful, methodical filing matters.