What type of losses are deductible only after certain conditions are met, including a federal disaster declaration?

Casualty and theft losses are deductible following specific conditions, one of which includes a federal disaster declaration. This designation allows taxpayers who experience such losses to claim the deduction on their tax return. The IRS has guidelines that dictate when these deductions can be taken, and they often hinge on the existence of a federally recognized disaster that impacts the property, such as hurricanes, floods, or other natural calamities.

When a federal disaster is declared, it opens the door for individuals to claim a deduction for losses that meet certain criteria, including the nature of the event and the extent of the damage incurred. Taxpayers can often deduct the cost of repairs or the loss in value of the property caused by the casualty event, subject to any applicable limitations.

Other types of losses, such as investment losses, business losses, and natural disaster losses, have their own rules regarding deductibility but are not specifically tied to the requirement for federal disaster declaration in the same way that casualty and theft losses are. This is why casualty and theft losses are correctly identified as those that require particular conditions, including formal recognition by federal authorities, to be deductible.