 When looking at the income tax formula, we're focused down here on the itemized deductions. Remembering the first half of the income tax formula is an Essenton income statement where we have income minus the equivalent of the expenses, those being the deductions equals the equivalent of net income, that being taxable income, everything being topsy-turvy for taxes, meaning the taxable income, we want it as low as possible, as opposed to normally, when we want the net income as high as possible. In prior sections, we talked about what needs to be included in income. We talked about what can be called the above-the-line deductions or adjustments to income, as opposed to the below-the-line deductions we are talking about now. That got us to the subtotal of the AGI, adjusted gross income, and important subtotal because it's often the number used to have phaseouts for income levels that are increasing with regards to expenses and credits. And then we have what could be called the below-the-line deductions, greater of the standard or itemized deductions. Here, we're focused on the itemized deductions. Deduct whatever's left. Which we would only be taking if they were greater than the standard deduction, although we may have an exception to the rule. For example, if we have a loss related to a federally declared disaster area, then we might use the Schedule A, the form used to calculate the itemized deduction to report the loss, but we might still get a benefit from it even if the itemized deductions are not greater than the standard deduction. Tax software is quite helpful to guide us through that type of situation if it occurs. So for example, this is the first page of the form 1040. We're focused on line 12, standard deduction or itemized deduction. We usually take the itemized deductions only if they're greater than the standard deduction, which is 12,950 for single filers, 25,900 for married filers, but if we have a qualified disaster related loss, we would still calculate that on the Schedule A and possibly even if we're not clearing these thresholds, be able to increase the amount of the otherwise taken standard deduction related to those items. So those are gonna be kind of exception areas for those particular and unique type of cases or those extreme type of cases. Now the standard deductions, remember normally you gotta clear the standard deductions, the 12,950 for the single file, the 25,900 before you get a benefit from the itemized deductions. However, it would make sense that if you had a deduction related to a qualified disaster that you should get a benefit from that whether you take the standard deduction or the itemized deduction because that's something that's kind of outside the norm. So you might have an exception in that case. Okay, casualty and theft losses. Line 15, complete an attached form 4684 to figure the amount of your loss, only enter the amount from form 4684 line 18 on line 15. You can only deduct personal casualty and theft losses attributable to a federally declared disaster to the extent that, and this you might be remembering like old rules. But remember, you gotta be updated on the tax code. So once again, you can only deduct personal casualty and theft losses attributable to a federally declared disaster to the extent that one, the amount of each separate casualty or theft loss is more than $100. That $100 threshold seems quite low possibly and it's been there for some time. So there's some things in the tax code, they kind of put this number in the tax code if they don't change it over time, it just sits there and then after time it looks kind of ridiculous because it hasn't been kind of changed for inflation but they haven't removed it either. So we've got that $100 threshold. Two, the total amount of all losses during the year reduced by the $100 limit discussed in one is more than 10% of the amount on form 1040, 1040 SR line 11 which I believe is the AGI. And three, see the instructions for form 4684 and publication 547 for more information. This is publication 547 casualty disasters and thefts for year 2021 but this is the most current revision that I can find at this point in time at the IRS website irs.gov, irs.gov, personal property. The FEMA disaster entry space in section A personal use property on form 4684 was added to the form for taxpayers reporting casualty or theft loss attributable to a federally declared disaster. So if you are reporting a casualty or theft loss attributable to a federally declared disaster, check the box, enter the DR or EM declaration number assigned by FEMA. So how it generally works is FEMA is gonna be the one that determines whether it's a federal disaster or not and then it's gonna be adopted and you have so you have the FEMA kind of code and you can look up and make sure that it is indeed something that is a federally declared disaster and the space provided above line one on your 2021 where this is the 2021 instructions but I still think it's the most revised publication at this time form 4684. So for more information, see the FEMA disaster declaration number later, special rules and return procedures expanded for claiming qualified disaster related personal casualty losses. The taxpayer certainty and disaster tax relief act of 2019 and the taxpayer certainty and disaster tax relief act of 2020 expanded the special rules and return procedures for personal casualty losses attributable to certain major federal disasters that were declared in 2018, 2019, 2020, personal casualty losses sustained in those tax years as a result of qualified disaster losses may be claimed on form 4684. See qualified disaster loss later for more information tip. You may have to file an amended return on form 1040x to claim these benefits on your 2018, 2019 and or 2020 returns form 1040x is available at irs.gov forward slash 1040x. So if you needed to amend the return, that's a 1040x. Prior versions of form 4684 are available at irs.gov forward slash 4684. See how to report the loss on form 1040x later. Limitation on personal casualty and theft losses, personal casualty and theft losses of an individual sustained in a tax year beginning after 2017 are deductible only to the extent that the losses are attributable to a federally declared disaster. Once again, in case you didn't get that point, personal casualty and theft losses attributable to a federally declared disaster are subject to the $100 per casualty and 10% of your adjusted gross income, the AGI limitations, unless they are attributable to a qualified disaster loss. So personal casualty and theft losses attributable to a qualified disaster loss are not subject to that 10% of AGI limit and the $100 limit is increased to 500. An exception to the rule above, limiting the personal casualty theft loss deduction to losses attributable to a federally declared disaster applies, you have personal casualty gains for the tax year. For more information, see deduction limit later. Introduction, this publication explains the tax treatment of casualty, theft and losses on deposits when casualty occurs, when your property is damaged as a result of a disaster such as storm, fire, car accident or similar event, a theft occurs when someone steals your property. A loss on deposit occurs when your financial institution becomes insolvent or bankrupt. So this publication discusses the following topics, definitions of a casualty, theft and loss on deposits, how to figure the amount of your gain or loss, how to treat insurance and other reimbursements you receive, obviously that's a key component when you're thinking about a loss type of situation because you can say this is the loss that I have and then did you get reimbursed with it for the insurance, because then that's obviously recouping part of the losses. The deduction limits, I'll win in how to report a casualty theft, the special rules for disaster area losses.