IRS Instruction 4684 – IRS Forms, Instructions, Pubs 2026 – If you’ve experienced a casualty or theft loss, understanding how to report it on your taxes is crucial. IRS Form 4684, titled “Casualties and Thefts,” allows taxpayers to calculate and claim deductions for such losses. This guide breaks down the IRS instructions for Form 4684 for the 2025 tax year, helping you navigate the process efficiently. Whether it’s damage from a storm, fire, or theft, we’ll cover who needs to file, key changes, and step-by-step guidance.
What Is IRS Form 4684?
IRS Form 4684 is used to report gains and losses resulting from casualties and thefts. A casualty is defined as the damage, destruction, or loss of property from a sudden, unexpected, or unusual event, such as a fire, storm, or accident. Thefts include larceny, embezzlement, or robbery. You attach this form to your tax return to figure the deductible amount of your loss, which may reduce your taxable income.
Important: For tax years 2018 through 2025, personal casualty and theft losses (non-business related) are only deductible if they stem from a federally declared disaster. This limitation was introduced by the Tax Cuts and Jobs Act and applies to losses on personal-use property like your home or car.
Who Needs to File Form 4684?
You should use Form 4684 if:
- You’ve suffered a casualty or theft loss on personal-use property due to a federally declared disaster.
- You have losses on business or income-producing property (no federal disaster requirement).
- You’re reporting theft losses from Ponzi-type investment schemes.
- You have casualty gains (e.g., insurance reimbursements exceeding your property’s basis).
- You’re electing to deduct a disaster loss in the prior tax year.
Individuals, corporations, S corporations, partnerships, estates, and trusts may all need to file. If you’re an individual with only non-deductible losses (not tied to a federal disaster), you might still need to file to report gains or offset other losses.
Key Definitions in the Instructions
- Federal Casualty Loss: A loss of personal-use property from a casualty or theft attributable to a disaster declared by the President under the Stafford Act.
- Disaster Loss: Broader than federal casualty losses; includes business or income-producing property in federally declared disaster areas.
- Qualified Disaster Loss: Specific losses from major disasters (e.g., 2016-2025 events like hurricanes, wildfires, or other declared incidents excluding COVID-19). These allow for special rules like no 10% AGI limit and a $500 reduction per casualty instead of $100.
- Ponzi-Type Theft Loss: Losses from fraudulent investment schemes where the promoter commits theft under state law, and there’s no reasonable prospect of recovery.
Refer to IRS Publication 547 for more examples of deductible vs. non-deductible losses.
What’s New for 2025 in IRS Form 4684 Instructions?
The 2025 instructions include several updates:
- Expanded Postponement of Tax Deadlines: Under the Filing Relief for Natural Disasters Act, automatic extensions for filing and payments are now up to 120 days for qualified state-declared disasters.
- Extended Disaster Tax Relief: Special rules for qualified disaster losses from major federal disasters between January 1, 2020, and September 2, 2025, have been extended.
- Financial Scams: Clarification that theft losses from scams in profit-motivated transactions may be deductible.
- Non-Taxable Relief Payments: Updates for qualified wildfire relief (2020-2025) and East Palestine train derailment payments, which are excluded from income under certain conditions.
- AMT Adjustment: The alternative minimum tax (AMT) adjustment for increased standard deductions due to net qualified disaster losses is inapplicable.
Always check IRS.gov/Form4684 for future developments, as legislation can impact these rules.
How to Complete IRS Form 4684: Step-by-Step?
Use a separate Form 4684 for each casualty or theft event. The form has four sections:
Section A: Personal Use Property
This section is for non-business property losses.
- Line 1: Describe the property and event (include FEMA disaster declaration number for federal disasters).
- Lines 2-4: Enter cost or basis, insurance reimbursements, and calculate any gain.
- Lines 5-6: Fair market value (FMV) before and after the event (use safe harbor methods from Rev. Proc. 2018-08 if needed).
- Line 11: Apply the $100 or $500 reduction ($500 for qualified disasters).
- Line 15: Total net gain or loss; transfer to Schedule A (itemized deductions) or Schedule D (capital gains).
Section B: Business and Income-Producing Property
For trade, business, rental, or royalty property.
- Part I: Detail each property (lines 19-28), similar to Section A but without the $100/$500 reduction.
- Part II: Summarize gains and losses (lines 29-39); allocate between short-term and long-term. Report totals on Form 4797 or Schedule D.
Section C: Theft Loss Deduction for Ponzi-Type Investment Scheme
Use if qualifying under Rev. Proc. 2009-20 (as modified). Calculate the deductible theft loss based on initial investment, income reported, and recoveries. Enter the result on Section B, line 28.
Section D: Election to Deduct Federally Declared Disaster Loss in Preceding Tax Year
- Part I: Make the election (attach to the prior year’s return).
- Part II: Revoke the election via an amended return.
Tips: File insurance claims first, as reimbursements reduce your loss. For disaster losses, you can elect to deduct in the prior year for potential tax benefits. If you have gains, you may postpone recognition by replacing the property within specified timelines (up to 4 years for disaster areas).
Special Rules for Disaster Losses and Deductions
- Limitation: Personal losses must exceed $100 ($500 for qualified) per event and 10% of AGI (waived for qualified disasters).
- Qualified Disasters: Deduct without itemizing; add net loss to standard deduction on Schedule A.
- Gains in Disaster Areas: No recognition on insurance for unscheduled personal property in homes; extended replacement period.
- Amended Returns: Use Form 1040-X to claim prior-year disaster losses or adjust for non-taxable relief payments.
- FEMA Numbers: Required for federal disaster claims; find them at FEMA.gov/Disasters.
For complex situations like corrosive drywall or insolvent financial institutions, consult the instructions or a tax professional.
Download IRS Form 4684 and Instructions
To get started, download the official documents directly from the IRS:
These are the latest versions for 2025 taxes. For prior years, visit IRS.gov/prior-year-forms-and-instructions.
Conclusion
Navigating casualty and theft losses can be complex, especially with the federal disaster requirement for personal deductions. By following the IRS instructions for Form 4684, you can accurately report your losses and potentially lower your tax bill. If your situation involves qualified disasters or business property, consider consulting a tax advisor to maximize benefits. Stay updated via IRS.gov for any last-minute changes.