{"id":313987,"date":"2025-11-23T18:10:49","date_gmt":"2025-11-23T18:10:49","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/casualty-loss-deductions-under-obbba-whats-new-for-taxpayers\/"},"modified":"2025-11-23T18:10:49","modified_gmt":"2025-11-23T18:10:49","slug":"casualty-loss-deductions-under-obbba-whats-new-for-taxpayers","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=313987","title":{"rendered":"Casualty Loss Deductions Under OBBBA: What\u2019s New for Taxpayers"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<p>Sweeping changes from the One Big Beautiful Bill Act (OBBBA) are altering how individuals claim personal casualty losses. For tax years beginning after December 31, 2025, more disaster-related losses may qualify, and several rules that were temporary are now permanent. Understanding these updates can make a big difference when disaster strikes.<\/p>\n<h2>State Disaster Declarations Now Count<\/h2>\n<p>In the past, only losses tied to federal disaster declarations could be deducted by individuals. Starting in 2026, losses from state-declared disasters may also be deductible.<\/p>\n<p>These state-recognized disasters include:<\/p>\n<ul>\n<li>Severe weather events like hurricanes, tornados and storms<\/li>\n<li>Earthquakes<\/li>\n<li>Fires, floods, and explosions declared by state authority<\/li>\n<\/ul>\n<p>More taxpayers affected by regionally-recognized disasters could now find relief.<\/p>\n<h2>Permanent \u201cDeclared Disaster Only\u201d Rule<\/h2>\n<p>Prior law would have allowed all personal casualty losses to be reinstated starting in 2026, regardless of cause. OBBBA overrides this indefinitely, extending the rule that only losses tied to declared disasters can be deducted.<\/p>\n<p>Personal-use property losses must now stem from a declared disaster \u2014 federal or state \u2014 to qualify.<\/p>\n<h2>$100 Per Event and 10% AGI Limits Locked In<\/h2>\n<p>Two long-standing limitations are now permanent features of casualty loss calculations:<\/p>\n<ul>\n<li><strong>$100 reduction per event: <\/strong>One reduction per disaster occurrence, not per damaged item.<\/li>\n<li><strong>10% of Adjusted Gross Income (AGI) floor: <\/strong>Only the amount of total losses that exceeds 10% of AGI is deductible.<\/li>\n<\/ul>\n<p>Additionally, the deductible amount is limited to the lesser of:<\/p>\n<ul>\n<li>The property\u2019s loss in value, or<\/li>\n<li>Its basis<\/li>\n<\/ul>\n<p>\u2026after insurance reimbursements.<\/p>\n<h2>Not Every Disaster Plays by the Same Rules<\/h2>\n<p>Congress has enacted special \u201cqualified disaster\u201d rules at times, sometimes, allowing a $500 floor and waiving the 10% AGI test. But labels matter:<\/p>\n<p><strong>Federal disaster does not automatically equal a qualified disaster.<\/strong><\/p>\n<p><em>Example:<\/em> Hurricane Ian (2022) became a \u201cqualified disaster\u201d only when Congress said so in 2024 \u2014 two years after landfall.<\/p>\n<p>Always verify the category before calculating the deduction.<\/p>\n<h2>Option to Deduct in the Prior Year<\/h2>\n<p>A helpful carryover benefit remains in place:<\/p>\n<p style=\"padding-left: 40px;\">Taxpayers may elect to deduct a disaster loss on the prior year\u2019s tax return, a potentially faster refund opportunity. This election remains exclusive to federal disaster declarations.<\/p>\n<p><strong>Deadline:<\/strong> Within six months after the regular due date (no extensions) for the disaster year return. For example, if the disaster occurred in 2024, the regular due date for the 2024 return is April 15, 2025, so the election must be made by October 15, 2025.<\/p>\n<h2>Example: Putting the Numbers to Work<\/h2>\n<p><strong>AGI for the year:<\/strong> $120,000<br \/><strong>Storm causes damage to home:<\/strong> $18,000<br \/><strong>Insurance reimburses:<\/strong> $5,000<\/p>\n<p><strong>Step 1: <\/strong>Actual economic loss<br \/>$18,000 \u2013 $5,000 =<strong> $13,000<\/strong><\/p>\n<p><strong>Step 2: <\/strong>Reduce by $100 per disaster event<br \/>$13,000 \u2013 $100 = <strong>$12,900<\/strong><\/p>\n<p><strong>Step 3: <\/strong>Apply 10% AGI floor<br \/>10% \u00d7 $120,000 = <strong>$12,000<\/strong><\/p>\n<p><strong>Final deductible loss:<\/strong><br \/>$12,900 \u2013 $12,000 = <strong>$900<\/strong><\/p>\n<p>A big storm\u2026 but a small deduction \u2014 federal tax relief is more of a safety net than a full recovery plan.<\/p>\n<h2>Quick Reference Chart<\/h2>\n<table style=\"width: 100%; border-collapse: collapse;\">\n<thead>\n<tr style=\"background-color: #f4f4f4;\">\n<th style=\"border: 1px solid #ddd; padding: 10px; text-align: left;\">Disaster Category<\/th>\n<th style=\"border: 1px solid #ddd; padding: 10px; text-align: left;\">Who Must Declare It<\/th>\n<th style=\"border: 1px solid #ddd; padding: 10px; text-align: left;\">$100 Floor<\/th>\n<th style=\"border: 1px solid #ddd; padding: 10px; text-align: left;\">10% AGI Limit<\/th>\n<th style=\"border: 1px solid #ddd; padding: 10px; text-align: left;\">Special Rules May Apply?<\/th>\n<th style=\"border: 1px solid #ddd; padding: 10px; text-align: left;\">Example<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"border: 1px solid #ddd; padding: 10px;\"><strong>State-declared disaster<\/strong><\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Governor<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Yes<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Yes<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Usually not<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Tornado recognized by Alabama<\/td>\n<\/tr>\n<tr style=\"background-color: #fafafa;\">\n<td style=\"border: 1px solid #ddd; padding: 10px;\"><strong>Federally declared disaster<\/strong><\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">President<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Yes<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Yes<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Unless later designated as qualified<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Major hurricane event<\/td>\n<\/tr>\n<tr>\n<td style=\"border: 1px solid #ddd; padding: 10px;\"><strong>Qualified disaster<\/strong><\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">President + Federal legislation<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Often $500 instead<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">No 10% AGI limit<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Additional relief available<\/td>\n<td style=\"border: 1px solid #ddd; padding: 10px;\">Specific wildfire event with tax law designation<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><em>Always check the exact statutory designation before computing a deduction.<\/em><\/p>\n<h2>Final Word<\/h2>\n<p>OBBBA makes disaster tax relief more accessible, especially when emergencies are acknowledged at the state level. But the guardrails aren\u2019t going anywhere: declared-only rules, the $100 reduction, and the 10% AGI requirement are here for the long haul.<\/p>\n<p>Preparing for the rules in advance means being ready when Mother Nature\u2026 gets in a mood.<\/p>\n<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>Sweeping changes from the One Big Beautiful Bill Act (OBBBA) are altering how individuals claim personal casualty losses. For tax years beginning after December 31, 2025, more disaster-related losses may qualify, and several rules that were temporary are now permanent. Understanding these updates can make a big difference when disaster strikes. State Disaster Declarations Now [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11759],"tags":[30913,19643,8681,94570,33471,5614],"dealstore":[],"offerexpiration":[],"class_list":["post-313987","post","type-post","status-publish","format-standard","hentry","category-accounting","tag-casualty","tag-deductions","tag-loss","tag-obbba","tag-taxpayers","tag-whats"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Casualty Loss Deductions Under OBBBA: What\u2019s New for Taxpayers - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=313987\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Casualty Loss Deductions Under OBBBA: What\u2019s New for Taxpayers - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"Sweeping changes from the One Big Beautiful Bill Act (OBBBA) are altering how individuals claim personal casualty losses. 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