! addition to a loss, you will have to make

CAUTION a special computation before you figure

your 10% limit. See 10% Rule in Pub. 547.

When Loss Is Deductible

Generally, you can deduct casualty losses that aren’t reimbursable only in the tax year in which they occur. You can generally deduct theft losses that aren’t reimbursable only in the year you discover your property was stolen.

Example. In November 2024, engine parts were stolen from Frank’s stored tractor. Frank didn’t know that the theft occurred until March 2025, when he attempted to start the tractor. Any theft loss to which Frank is entitled as a deduction will be deductible in the 2025 tax year.

Losses in federally declared disaster areas are subject to different rules. See Disaster Area Losses , later, for an exception.

If you aren’t sure whether part of your casualty or theft loss will be reimbursed, don’t deduct that part until the tax year when you become reasonably certain that it won’t be reimbursed.

Leased property. If you lease property from someone else, you can deduct a loss on the property in the year your liability for the loss is determined. This is true even if the loss occurred or the liability was paid in a different year. You aren’t entitled to a deduction until your liability under the lease can be determined with reasonable accuracy. Your liability can be determined when a claim for recovery is settled, adjudicated, or abandoned.

Example. Robert leased a tractor from First Implement, Inc., for use in his farm business. The tractor was destroyed by a tornado in June 2024. The loss wasn’t insured. First Implement billed Robert for the FMV of the tractor on the date of the loss. Robert disagreed with the bill and refused to pay it. First Implement later filed suit in court against Robert. In 2025, Robert and First Implement agreed to settle the suit for $20,000, and the court entered a judgment in favor of First Implement. Robert paid $20,000 in June 2025. He can claim the $20,000 as a loss on his 2025 tax return.

Net operating loss (NOL). If your deductions, including casualty or theft loss deductions, are more than your income for the year, you may have an NOL. See Form 172 and its instructions for more information.

Generally, an NOL arising in a tax year