WHAT IS 'Form 4684: Casualties And Thefts'

Form 4684: Casualties And Thefts is a form the U.S. Internal Revenue Service distributes for reporting losses from casualties and thefts that may be deductible for taxpayers who itemize deductions.

Casualty losses can be the result of fires, floods and other disasters, but taxpayers can't deduct expenses related to personal injuries. Taxpayers can deduct losses in the tax year they incurred them; or in the case of theft, the tax year they discovered the losses. 

BREAKING DOWN 'Form 4684: Casualties And Thefts'

Form 4684: Casualties And Thefts may be filed when taxpayers who itemize deductions report losses on IRS Schedule A. Some taxpayers do not itemize deductions and are not required to complete the form. This form only applies to personal losses, not for casualties and thefts related to business property.

Types of Losses Reported on Form 4684: Casualties And Thefts

For tax purposes, deductible casualty losses generally must result from an event that is sudden, unexpected or unusual. Casualties include natural disasters such as earthquakes, fires, floods or storms. Other types of casualties include vandalism, car accidents and other vehicle collisions. The loss of deposits in some financial institutions that become bankrupt or insolvent can sometimes qualify as a casualty.

But damage alone may not qualify a deductible casualty loss. For example, damage to a home from termite infestation or invasion of molds and fungi is not considered a casualty loss because such damage is the result of an ongoing process, not a sudden event. In addition, a car accident may result in losses, but those losses are not deductible if the taxpayer was willfully negligent in causing it.

Although casualty losses are usually deductible only for the tax year those losses were incurred, special provisions are made for qualified disaster losses, which may be deductible in the previous year and provide additional tax advantages. These are defined as disasters that are federally declared to qualify. In 2017, for example, these included specific areas related to damage caused by Hurricane Harvey, Hurricane Irma and Hurricane Maria.

Theft losses are deductible if the theft is considered a crime in the state it occurred and someone acted with criminal intent. These losses can result from burglary, robbery and extortion.

Fraud may be considered theft in certain circumstances, but if losses are the result of a decline in the price of a company’s stock because of illegal misconduct on the part of company executives, losses may not be deductible. Those losses can, however, result in a  capital loss which can offset a taxpayer’s capital gains or reduce taxable income.

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