What Is Form 4684: Casualties and Thefts?
Let me explain Form 4684 directly: it's an IRS form you use to report gains or losses from casualties and thefts, and these might be deductible if you itemize your deductions. Casualty losses come from things like fires, floods, or other disasters, and you can usually deduct them in the tax year they occur. For thefts, it's the year you discover the loss.
Key Takeaways
Here's what you need to know: Form 4684 covers gains or losses from casualties and thefts tied to federally declared disasters, deductible for those who itemize. If you live in a federally declared disaster area, you don't have to itemize to file this form. A casualty loss means damage, destruction, or loss of your property from sudden, unexpected events like floods, hurricanes, tornadoes, fires, earthquakes, or volcanic eruptions.
Who Can File Form 4684: Casualties and Thefts?
You should file Form 4684 if you're reporting gains or losses from a casualty or theft. Homeowners who get notified to tear down or move a structure after a federally declared disaster can use it to claim the difference in their home's value before and after the event, but only if the notification comes from the building authority within 120 days of the disaster declaration.
Personal property casualties and thefts are deductible only if they're from a federally declared disaster, with an exception if you have personal casualty gains—then you can offset them with non-disaster losses. If you're in a disaster area, no need to itemize. Remember, you can't deduct personal injury expenses on this form.
Important Notes on Form 4684
This form mostly applies to personal losses, not business property casualties or thefts. Once you confirm your losses qualify, fill out Form 4684 and attach it to your tax return or an amended return. For deducting federally declared disaster losses from the previous year, use Section D.
Special Considerations When Filing Form 4684
Form 4684 lets you deduct unreimbursed losses from specific events that are sudden, unexpected, or unusual, and during a federally declared disaster. These include natural disasters like earthquakes, fires, floods, or storms, plus vandalism, car accidents, and shipwrecks. There are also provisions for losses from corrosive drywall or caustic pyrrhotite concrete.
Even losses from deposits in bankrupt or insolvent financial institutions can qualify sometimes, and Section C covers deductions for things like Ponzi schemes. But not all damage counts—termite infestations or mold invasions don't qualify because they're ongoing, not sudden. Car accident losses aren't deductible if you were willfully negligent.
Theft losses cover embezzlement and larceny if it's a crime in your state with criminal intent, and fraud might count too. However, stock price drops from executive misconduct aren't deductible as casualties but could be capital losses to offset gains or income.
Form 4684 and Federal Disaster Areas
Section D of Form 4684 is for federally declared disaster losses. Normally, you deduct in the year of the loss, but qualified disaster losses can be deducted in the previous tax year for extra benefits. The loss must be in a specific declared area.
For 2021, per the IRS, a qualified disaster loss includes personal property casualties or thefts from major disasters declared by the President between January 1, 2020, and February 25, 2021, with incident periods starting between December 28, 2019, and December 27, 2020, and ending no later than January 26, 2021—but this excludes COVID-19-only declarations.
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