Real Estate Accounting Tax Tips | Landlord Guide to Property Damage & Casualty Loss Tax Deductions
Losses incurred because of a casualty, disaster, or theft may be tax-deductible. A casualty is a loss of property (including damage and destruction) due to a sudden event that is identifiable, unexpected, and unusual. These losses may be limited, but they are deductible as a rental activity expense.
For example, your tenant runs their car through the garage door. Even though you haven’t replaced the garage door and don’t have any expenses because you didn’t fix anything, you can deduct the cost of damages incurred as a casualty expense.
Casualty losses on rental property are reported on Schedule A from IRS Form 4684, and are not subject to the 2% AGI limitation or $100 deduction.
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