Quick Answer
For 2026, casualty losses must exceed 10% of your adjusted gross income plus $100 per event to be deductible. A taxpayer with $75,000 AGI needs losses over $7,600 ($7,500 + $100) per casualty event to qualify for any deduction.
Best Answer
Robert Kim, CPA
Property owners who suffered losses from storms, fires, theft, or other sudden events
How the casualty loss threshold works
The casualty loss deduction has a two-part threshold that catches many taxpayers off guard. First, you subtract $100 from each casualty event. Then, your total casualty losses must exceed 10% of your adjusted gross income (AGI) before you can deduct anything.
According to IRS Publication 547, this "10% of AGI" rule means most middle-income homeowners can't deduct smaller losses, even legitimate ones.
Example: $75,000 AGI homeowner with storm damage
Let's say you earn $75,000 and suffered $12,000 in storm damage to your roof and fence:
You can only deduct $4,400, not the full $12,000 loss.
Multiple events in one year
If you have multiple casualty events, subtract $100 from each, then apply the 10% AGI test to the total:
Key factors that affect your deduction
What qualifies as a casualty loss
Per IRC Section 165(c)(3), qualifying events must be sudden, unexpected, and unusual:
What you should do
Document all losses immediately with photos, repair estimates, and insurance correspondence. Use our return scanner to check if you missed casualty losses from previous years - you can amend returns up to three years back.
Key takeaway: With the 10% AGI threshold, homeowners need substantial losses to qualify - typically $7,500+ for middle-income earners before any deduction kicks in.
*Sources: [IRS Publication 547](https://www.irs.gov/pub/irs-pdf/p547.pdf), IRC Section 165(c)(3)*
Key Takeaway: The 10% AGI threshold means you need substantial losses before qualifying - typically $7,500+ for middle-income homeowners.
Casualty loss deduction thresholds by income level
| AGI | 10% Threshold | Loss Needed (+ $100) | Example Deductible Loss |
|---|---|---|---|
| $40,000 | $4,000 | $4,100 | $8,000 loss = $3,900 deduction |
| $75,000 | $7,500 | $7,600 | $12,000 loss = $4,400 deduction |
| $100,000 | $10,000 | $10,100 | $15,000 loss = $4,900 deduction |
| $150,000 | $15,000 | $15,100 | $20,000 loss = $4,900 deduction |
| $200,000 | $20,000 | $20,100 | $25,000 loss = $4,900 deduction |
More Perspectives
Michelle Woodard, JD
Taxpayers with higher AGI who face larger thresholds but may have more valuable property at risk
Why high earners face steeper hurdles
High-income taxpayers face proportionally higher casualty loss thresholds. With $200,000 AGI, you need losses exceeding $20,100 ($20,000 + $100) before claiming any deduction.
Strategic considerations for high earners
Timing multiple losses: If you have control over when to recognize losses (like selling damaged investment property), consider bunching them in one tax year to clear the 10% threshold.
Business vs. personal classification: High earners often have home offices or rental properties. Business casualty losses aren't subject to the 10% AGI limitation - they're fully deductible against business income.
Example: $200,000 earner with mixed losses
This mixed approach salvages value from the harsh personal casualty rules.
Key takeaway: High earners should explore business classification for home office or rental property portions to avoid the 10% AGI limitation entirely.
Key Takeaway: High earners should explore business classification for portions of casualty losses to bypass the 10% AGI limitation.
Robert Kim, CPA
Retirees and seniors who may have lower AGI but valuable property accumulated over decades
Why retirees often benefit more from casualty deductions
Retirees typically have lower AGI but own valuable property, making casualty deductions more accessible. A retiree with $40,000 in Social Security and pension income only needs losses exceeding $4,100 ($4,000 + $100) to start deducting.
Special considerations for seniors
Basis limitations: Many retirees own homes bought decades ago at low prices. Your casualty deduction can't exceed your basis in the property, which may be much less than current market value.
Example: You bought your home in 1980 for $50,000 (your basis). Today it's worth $300,000. Storm damage costs $80,000 to repair, but your casualty loss is limited to $50,000 - your basis in the home.
Medicare and AGI planning: Large casualty deductions can significantly reduce your AGI, potentially lowering Medicare Part B premiums (which are income-based) for future years.
Estate planning angle
If you're considering gifting damaged property to heirs, time the casualty loss recognition carefully. Taking the deduction yourself (if you can use it) versus passing the loss basis to heirs requires analysis of respective tax brackets.
Key takeaway: Retirees' lower AGI makes casualty deductions more accessible, but basis limitations from older property purchases can cap the deduction significantly.
Key Takeaway: Retirees benefit from lower AGI thresholds but face basis limitations on properties purchased decades ago at lower prices.
Sources
- IRS Publication 547 — Casualties, Disasters, and Thefts
- IRC Section 165 — Losses
Reviewed by Robert Kim, CPA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.