Can I Claim a Theft Loss on My Taxes? 2025 Guide

Understanding Theft Loss Tax Deductions

Can I claim a theft loss on my taxes? For tax years 2018 through 2025, you can only claim theft losses of personal-use property if they’re attributable to a federally declared disaster. However, business property theft losses remain deductible regardless of disaster status.

Quick Answer:

When someone breaks into your home or business and steals your property, the financial impact goes beyond just replacing what was taken. Many taxpayers wonder if there’s any tax relief available for their loss.

The Tax Cuts and Jobs Act significantly changed the rules for theft loss deductions. Before 2018, most theft losses were deductible (with certain limitations). Now, the rules are much more restrictive for personal property.

To claim a theft loss deduction, you’ll need to prove:

1. The theft actually occurred
2. You owned the stolen property
3. The year you finded the loss
4. No reasonable prospect of recovery exists

As the IRS states in Publication 547: “A theft is the taking and removing of money or property with the intent to deprive the owner of it.”

If your loss qualifies, you’ll need to complete Form 4684 and potentially itemize deductions on Schedule A, depending on the nature of your property.

What Qualifies as a Theft Loss for Tax Purposes?

When something of yours is stolen, it’s not just frustrating—it can be financially devastating. But what exactly counts as a “theft” when it comes to your taxes?

The IRS takes a fairly broad view of theft, defining it as “the taking and removing of money or property with the intent to deprive the owner of it.” This definition isn’t just limited to someone breaking into your home. It actually covers a wide range of criminal activities that might surprise you:

Your property could be taken through larceny (direct stealing), robbery, embezzlement, extortion, kidnapping for ransom, blackmail, or even fraud where someone intentionally misrepresents facts to take your property.

For your situation to qualify as a theft loss on your taxes, two key elements must be present:

First, the taking must be illegal under local law where it happened. If your home in Orlando was burglarized, the incident needs to qualify as illegal under Florida state law before you can claim it on your federal tax return.

As Revenue Ruling 72-112 clearly states:

“To qualify as a ‘theft’ loss within the meaning of Section 165 of the Code, the taxpayer needs only to prove that his loss resulted from a taking of property that is illegal under the law of the state where it occurred, and that the taking was done with criminal intent.”

Second, there must be criminal intent behind the taking. This is an important distinction—if you accidentally leave your smartphone at a restaurant and someone picks it up, you’d need to establish they took it with criminal intent rather than just holding it for safekeeping.

It’s also worth noting that you must actually own the property that was stolen. If someone steals a rental car you were using or equipment you borrowed from a friend, you generally can’t claim the theft loss (though the actual owner might be able to).

Understanding these distinctions can make a significant difference in determining whether your unfortunate experience qualifies for tax relief. While the definition is broad, the specific circumstances matter greatly when can I claim a theft loss on my taxes becomes a pressing question after experiencing a theft.

Can I Claim a Theft Loss on My Taxes?

If you’ve been the victim of theft, you might be wondering if Uncle Sam will give you a break on your taxes. The answer isn’t as simple as it once was, thanks to the Tax Cuts and Jobs Act (TCJA) that went into effect in 2018.

Before 2018, most theft losses could be deducted (with certain limitations). Now, the rules are much more restrictive and will remain so until at least 2025, unless Congress extends these provisions. Here’s what you need to know in 2025:

For your personal belongings, the rules have tightened considerably. You can generally only claim a theft loss if it’s connected to a federally declared disaster. This means if someone breaks into your home and steals your television or jewelry, you typically can’t deduct that loss on your taxes unless the theft happened during something like a declared hurricane or major flooding event.

For business or income-producing property, there’s good news. Theft losses remain fully deductible regardless of whether they’re connected to a federally declared disaster. So if inventory disappears from your store shelves or equipment is stolen from your office, you can still claim those losses on your tax return.

Can I Claim a Theft Loss on My Taxes if It’s Not a Federally Declared Disaster?

While the general rule is that personal theft losses must be connected to federally declared disasters, there is one notable exception that might help you.

You may be able to deduct theft losses not connected to a federally declared disaster to the extent you have what the IRS calls “personal casualty gains.” These gains happen when you receive insurance or other reimbursements that exceed the adjusted basis of your lost, damaged, or destroyed property.

For example, imagine your car was damaged in a federally declared flood, and your insurance paid you $5,000 more than your adjusted basis in the car. In the same tax year, thieves broke into your home and stole items worth $3,000 (not related to any disaster). You could use that $3,000 theft loss to offset part of your $5,000 casualty gain, reducing your taxable gain to $2,000.

The IRS still applies some limitations. As they explain in Publication 547:

“Personal casualty or theft losses of personal-use property are deductible only to the extent that:

1. The amount of each separate casualty or theft loss is more than $100, and
2. The total amount of all losses during the year (reduced by the $100 limit) is more than 10% of your adjusted gross income (AGI).”

These limitations apply specifically to losses tied to federally declared disasters or those used to offset personal casualty gains.

Special Rules for Business and Income-Producing Property

If you’re a business owner or have income-producing property, you’ll be happy to know the rules are more favorable. Theft losses of business or income-producing property remain fully deductible, regardless of whether they’re connected to a federally declared disaster.

This means:

If someone steals inventory from your Orlando store, you can claim a theft loss deduction on your taxes.

If appliances are stolen from a rental property you own, you can deduct that loss.

If equipment used in your business disappears, you can claim it as a tax deduction.

For business property, you’ll generally report the loss on Form 4684, Section B, and it may ultimately appear on your business tax return (Schedule C for sole proprietors, Form 1065 for partnerships, Form 1120 for corporations, etc.).

At Global Public Adjusters, Inc., we’ve helped countless business owners across Florida properly document their losses to maximize both insurance recoveries and potential tax benefits. Proper documentation isn’t just crucial for your insurance claim—it’s essential for substantiating tax deductions as well.

Requirements for Claiming a Theft Loss Deduction

When someone steals your property, the financial hit can be devastating. While tax deductions can’t undo the emotional impact, they might offer some financial relief. But before you can claim that theft loss on your taxes, you need to meet several key requirements.

First and foremost, you’ll need to prove the theft actually occurred. This isn’t just about telling the IRS someone took your stuff—you need to demonstrate the taking was illegal under your state’s laws and done with criminal intent. For Florida residents, this means showing the theft violated Florida law. A police report is your best friend here—file one as soon as possible after finding the theft.

You’ll also need to establish ownership of what was stolen. Think about it—the IRS can’t let you claim a deduction for property that wasn’t yours in the first place. Gather those receipts, dig up photographs, find appraisals—anything that shows the items belonged to you.

The amount of your loss matters too. You’ll need to determine your financial damage based on the property’s adjusted basis—typically what you originally paid, plus any improvements, minus depreciation. This isn’t about what it would cost to replace the items today, but rather what your actual investment in them was.

Timing is another critical factor. Theft losses are generally deductible in the year you find the theft, not necessarily when it happened. If your garage was broken into in December 2024 but you didn’t find it until January 2025, the loss would be claimed on your 2025 return.

Finally, you must show there’s no reasonable prospect of recovery through insurance or other means. If your insurance might cover the loss, you can’t claim the deduction until it’s clear how much (if anything) you’ll recover.

As noted in the Littlejohn v. Commissioner case:

“As used in section 165, the term ‘theft’ is a word of general and broad connotation, intended to cover any criminal appropriation of another’s property, including theft by larceny, embezzlement, obtaining money by false pretenses, and any other form of guile.”

While this broad definition works in your favor, the burden of proof falls squarely on your shoulders. You need to convince the IRS that a theft actually occurred under applicable law.

Documentation Needed to Prove a Theft Loss

When it comes to theft loss claims, documentation isn’t just helpful—it’s essential. Think of it this way: the IRS wasn’t there when the theft happened, so you need to paint them a clear picture with evidence.

Start with a police report. This official document serves as third-party verification that a crime occurred. File it promptly—delays can raise red flags with the IRS. The report should include details about what was stolen and when the theft likely occurred.

Your insurance claim records are equally important. Keep copies of all forms you submit, notes from conversations with adjusters, emails exchanged, and documentation of any payments received. This paper trail shows you’ve done your due diligence in seeking recovery before turning to the tax system for relief.

Proof of ownership is where many taxpayers stumble. The more valuable the stolen item, the more documentation you’ll want. Original receipts are gold standard evidence, but credit card statements, bank records, and photos or videos of you with the items can help too. For particularly valuable items like jewelry or artwork, appraisals can be invaluable. And don’t forget to note down serial numbers for electronics and other items that have them.

You’ll also need to document the value of what was stolen. This includes purchase receipts showing what you paid, evidence of any improvements made (like repairs or upgrades), and documentation of the items’ condition before the theft. For unique or collectible items, professional appraisals from before the theft are extremely helpful.

Finally, keep records that establish when you finded the theft. This matters because you claim the loss in the year of findy, not necessarily when the theft occurred. Dated police reports, insurance claims, and communications about the theft all help establish this timeline.

For more information about handling theft and vandalism damage, check out our Theft Vandalism Damage page.

Can I Claim a Theft Loss on My Taxes Without Filing an Insurance Claim?

Here’s the short answer: probably not. If your stolen property is covered by insurance, the IRS expects you to file a claim with your insurance company first. Skipping this step will likely mean saying goodbye to any potential tax deduction.

This requirement makes sense when you think about it. Tax deductions for theft losses are designed to help with unrecovered losses—not to substitute for insurance coverage you’ve chosen not to pursue. The government doesn’t want to foot the bill when your insurance company should be the one paying.

As the IRS clearly states in Publication 547:

“If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Otherwise, you can’t deduct the loss as a casualty or theft loss.”

But what if you file an insurance claim and it gets denied? Keep every scrap of documentation related to that denial. The denial letter, emails discussing the reasons—all of this becomes critical evidence supporting your tax deduction claim. Insurance companies deny claims for various reasons, from missed deadlines to policy exclusions, which we cover in detail on our Reasons Why Your Property Insurance Claim Can Be Denied page.

Sometimes, homeowners worry that filing a claim might increase their premiums or lead to policy cancellation. While these concerns are valid, they unfortunately don’t exempt you from the IRS requirement to file a claim if you want the tax deduction. It’s a tough position to be in, but the rules are clear.

For more detailed information about tax treatment of theft losses, you can visit the IRS Tax Topic 515 on Casualty, Disaster, and Theft Losses, which provides official guidance on these matters.

At Global Public Adjusters, Inc., we specialize in navigating the often confusing insurance claims process. We’ve seen how proper handling of an insurance claim affects not just your immediate recovery, but also your ability to claim a theft loss on your taxes if you qualify. Our expertise becomes particularly valuable when insurance companies deny or undervalue claims, potentially leaving you with losses that might be tax-deductible.

Calculating the Amount of Your Theft Loss Deduction

Figuring out exactly how much you can deduct for a theft loss isn’t always straightforward. Don’t worry though—I’ll walk you through the process step by step, so you’ll know exactly what to expect when tax time rolls around.

For personal property that was stolen during a federally declared disaster (remember, that’s generally the only time personal theft losses are deductible these days), here’s how to calculate your potential deduction:

First, you’ll need to determine your adjusted basis in the stolen items. This is typically what you originally paid, plus any improvements you made, minus any depreciation you’ve taken over the years. Think of it as the investment you had in the property.

Next, figure out the fair market value (FMV) decrease. With theft, this is pretty simple—since your property is gone, the FMV after theft is zero. The decrease equals whatever the items were worth right before they disappeared.

Now, take the smaller amount between your adjusted basis and the FMV decrease. This represents your initial loss figure.

From this amount, subtract any insurance reimbursement you received or expect to receive. This gives you your actual economic loss.

Then comes the $100 rule—you’ll need to reduce your loss by $100 for each theft event (or $500 for qualified disaster losses). Notice this applies per event, not per item stolen.

Finally, apply the 10% AGI rule. Add up all your personal casualty and theft losses for the year, then subtract 10% of your adjusted gross income. Whatever’s left is your deductible amount.

Let’s see how this works with a real-world example:

Maria lives in Orlando and lost jewelry worth $5,000 during a hurricane-related burglary. Her adjusted basis in the jewelry was $3,000, and her insurance covered $1,000. Her AGI for the year is $50,000.

Here’s her calculation:

• Adjusted basis: $3,000
• FMV before theft: $5,000
• FMV after theft: $0
• Decrease in FMV: $5,000
• Smaller of basis or FMV decrease: $3,000
• Minus insurance: $3,000 – $1,000 = $2,000
• Apply $100 rule: $2,000 – $100 = $1,900
• Apply 10% AGI rule: $1,900 – ($50,000 × 10%) = $1,900 – $5,000 = $0

Unfortunately, Maria can’t claim a deduction because her loss doesn’t exceed 10% of her AGI. This is a common outcome for many taxpayers with modest losses.

For business or income-producing property, the math is much simpler:

1. Start with your adjusted basis
2. Subtract any insurance reimbursement
3. That’s your deduction (no $100 or 10% AGI limitations)

This is one reason why business theft losses can be more valuable from a tax perspective.

Applying the $100 and 10% AGI Limitations

These limitations often determine whether your personal theft loss will actually provide any tax benefit. Let’s dig a little deeper:

The $100 rule applies to each separate theft event. If thieves broke into your home once and took multiple items, that’s one event and you subtract $100 once. If you experienced separate thefts on different occasions, you’d subtract $100 from each event.

The 10% AGI rule is where many potential deductions disappear. After applying the $100 rule, you combine all your personal casualty and theft losses for the year, then subtract 10% of your adjusted gross income. Only what exceeds that threshold is deductible.

For example, if your AGI is $75,000, your losses would need to exceed $7,500 before you’d see any tax benefit. That’s a significant hurdle for many taxpayers.

But there’s good news for qualified disaster losses. The Tax Cuts and Jobs Act created special rules that make these losses much more valuable:

• You can deduct them without itemizing other deductions
• The per-event reduction increases from $100 to $500
• The 10% AGI limitation doesn’t apply
• You can still claim the standard deduction

Here’s how this works in practice:

After a hurricane hit Pensacola (a federally declared disaster), thieves stole John’s electronics worth $4,000 during the evacuation. His adjusted basis was $3,500, with no insurance coverage. His AGI is $60,000.

For this qualified disaster loss:

• Adjusted basis: $3,500
• After applying the $500 rule: $3,500 – $500 = $3,000

Since it’s a qualified disaster loss, John can claim the full $3,000 deduction without worrying about the 10% AGI limitation, and he doesn’t have to itemize his other deductions.

Can I Claim a Theft Loss on My Taxes for Stolen Cryptocurrency?

The digital asset world presents unique challenges when it comes to theft losses. If you’ve had cryptocurrency stolen, you’re probably wondering: can I claim a theft loss on my taxes for those digital assets?

The short answer is: possibly, but it’s complicated.

The IRS treats cryptocurrency as property, not currency. This means the same general theft loss rules apply:

For personal-use cryptocurrency (like Bitcoin you were holding to eventually spend), theft losses are only deductible if they’re connected to a federally declared disaster during tax years 2018-2025.

For cryptocurrency held as an investment or used in business, theft losses may be deductible regardless of disaster status, following the more favorable business property rules.

Proving cryptocurrency theft is particularly challenging. You’ll need to document:

• Your ownership of the cryptocurrency
• That a theft actually occurred (not just a bad investment or scam)
• Your adjusted basis (what you paid for the crypto)
• When you finded the theft occurred

If your crypto was stolen through hacking, phishing, or other means, document everything: file a police report, save all details about the theft including dates and wallet addresses, and maintain records showing when and how you acquired the cryptocurrency.

Since the IRS hasn’t issued specific guidance on cryptocurrency theft losses, consulting with a tax professional experienced in digital assets is highly recommended. This remains a gray area of tax law that continues to evolve.

At Global Public Adjusters, Inc., we stay on top of emerging issues like cryptocurrency theft to ensure our clients understand all their options when dealing with losses of all kinds, both traditional and digital.

How to Report a Theft Loss on Your Tax Return

Paperwork isn’t anyone’s idea of fun, especially after you’ve already dealt with the stress of a theft. But if you’re hoping to claim a theft loss on your taxes, getting the forms right is essential. Let’s break down the process into manageable steps.

For all theft losses, your journey begins with Form 4684, Casualties and Thefts. Think of this form as your starting point – it’s where you’ll calculate your loss and determine how much you can actually deduct.

The path splits depending on whether your stolen property was personal or business-related:

For personal property thefts (remember, only those related to federally declared disasters for tax years 2018-2025), you’ll work with Section A of Form 4684. After calculating your loss, you’ll transfer that amount to Schedule A for itemized deductions.

There’s a silver lining for qualified disaster losses – you don’t have to itemize to claim them. Instead, follow the special instructions on Form 4684 that allow you to take both the standard deduction and your disaster loss.

For business or income-producing property thefts, Section B of Form 4684 is your destination. Once completed, the deductible amount gets reported on your appropriate business tax form. If you’re a sole proprietor, that’s Schedule C. Partnerships use Form 1065, corporations use Form 1120, and rental property owners report on Schedule E.

When filling out Form 4684, be prepared to provide details about your stolen property – what it was, when you bought it, how much you paid, and any insurance money you received or expect to receive. For disaster-related losses, don’t forget to include the FEMA disaster declaration number. This small detail ensures your loss gets processed correctly and you receive all available tax benefits.

I’ve seen clients at Global Public Adjusters forget to check the disaster declaration box when applicable, potentially leaving money on the table. One simple checkbox can make a significant difference in how your loss is processed.

When to Claim a Theft Loss on Your Taxes

Timing matters tremendously when claiming theft losses. The general rule is simple: you deduct the loss in the tax year you find the theft, not necessarily when it happened.

Imagine someone steals your business equipment during the holiday rush in December 2024, but you don’t notice until you do inventory in January 2025. In this case, you’d claim the loss on your 2025 tax return (which you’ll file in 2026).

However, there’s an important wrinkle in this timing – the “reasonable prospect of recovery” rule. If you’re expecting reimbursement through insurance or other means, you can’t claim the loss until you know for certain how much you’ll recover.

As the Treasury Regulation states, no portion of a loss is considered “sustained” until you can determine with “reasonable certainty” whether you’ll be reimbursed. In plain English: if you’ve filed an insurance claim, you need to wait until that claim is settled before claiming the tax deduction.

This waiting period can sometimes push your deduction to a later tax year than when you finded the theft. It’s frustrating, but necessary to avoid having to amend returns later if you receive unexpected reimbursements.

There is a special timing option for federally declared disasters – you can choose to deduct the disaster-related loss on your previous year’s tax return by filing an amendment. This might get you a refund more quickly, which can be helpful when you’re recovering from both a disaster and theft.

Can I Claim a Theft Loss on My Taxes from Previous Years?

“Is it too late to claim a theft loss from last year?” This is a question we hear often at Global Public Adjusters. The answer isn’t a simple yes or no – it depends on your specific situation.

Generally, you need to claim a theft loss in the year you finded it. But there are several scenarios where you might be able to reach back to previous years:

Filing an amended return is possible if you finded a theft in a previous year but didn’t claim the deduction. The IRS gives you three years from when you filed your original return (or two years from when you paid the tax, whichever is later) to file an amended return using Form 1040-X.

If you had a reasonable prospect of recovery when you finded the theft – perhaps your insurance claim was pending – you wouldn’t claim the deduction until it became clear you wouldn’t recover your loss. This might legitimately push your deduction to a later tax year.

For federally declared disasters, you have a special opportunity. You can choose to deduct the loss on your tax return for the year immediately before the disaster year by filing an amended return.

For example, if your valuables were stolen during a hurricane in 2024, you could elect to claim that loss on your 2023 tax return by filing an amendment. This might provide faster financial relief when you need it most.

To make this election, you’ll need to complete Section D of Form 4684, specify the disaster date and FEMA declaration number, and attach it to your amended return. This option is only available for federally declared disasters – other theft losses must be claimed in the year of findy or when there’s no reasonable prospect of recovery.

Can I claim a theft loss on my taxes often comes down to timing and documentation. When in doubt, consult with a tax professional who can guide you through the specific requirements for your situation.

Conclusion

Figuring out if you can claim a theft loss on your taxes feels a bit like solving a puzzle these days, especially with all the changes from the Tax Cuts and Jobs Act. Let’s take a moment to put all the pieces together.

The landscape has changed dramatically for theft loss deductions. If someone stole your personal items, you can generally only claim a tax deduction if the theft happened during a federally declared disaster. This limitation can feel frustrating when you’re already dealing with the emotional impact of a break-in.

The good news? Business owners still have options. If thieves target your business inventory or equipment, you can still claim these losses regardless of whether a disaster was declared. This distinction is crucial for many of our Florida business clients who experience theft.

Remember those key requirements we discussed? You’ll need to prove the theft actually happened (that police report is essential!), show you owned the stolen items, pinpoint when you finded the theft, and demonstrate there’s no reasonable chance of getting reimbursed another way. Documentation is absolutely your friend here – photos, receipts, and insurance claim paperwork will make the process much smoother.

For personal property losses that do qualify, don’t forget about those $100 and 10% AGI limitations that can reduce your deduction. These thresholds don’t apply to business property, which is another advantage for business owners.

Timing matters too. You’ll generally claim the loss in the year you finded the theft, not necessarily when it happened. This can sometimes work in your favor if you need the tax relief in the current year.

Here at Global Public Adjusters, Inc., we’ve seen how theft can turn your world upside down. While the tax benefits aren’t as generous as they once were, understanding your options can still provide some financial relief when you need it most.

Our team works with theft victims across Orlando, Pensacola, and throughout Florida every day. We help you steer not just the tax implications, but also the insurance claims process to ensure you receive the maximum settlement possible. The documentation we help you gather serves double duty – supporting both your insurance claim and potentially qualifying you for tax benefits.

“Global Public Adjusters, Inc. can assist you in navigating the complexities of theft loss claims and insurance recoveries.”

When something’s stolen from you, it’s not just about the financial loss – it’s the feeling of violation and insecurity that follows. We understand both the practical and emotional sides of theft recovery, and we’re here to help you through the entire process.

For more information about how we can help with theft and vandalism damage claims, visit our Theft Vandalism Damage page.