Can I deduct Federal Declared Casualty loss on Second Home with No insurance? Hurricane damage tax questions!

The IRS position is technically correct, but there are some nuances worth understanding. While casualty losses in federally declared disaster areas can be deductible, the Tax Cuts and Jobs Act changed the rules significantly, and there's a specific requirement about insurance. The IRS generally disallows casualty loss deductions for properties that should reasonably have been insured. Since vacation homes in hurricane-prone areas like Florida would typically be expected to have insurance coverage, the IRS has grounds to deny the deduction. This rule exists to prevent taxpayers from essentially self-insuring while passing the risk to the government through tax deductions. That said, your options aren't completely exhausted. The calculation for casualty losses uses the lesser of your adjusted basis or the decrease in fair market value - not just the market value decrease. You might want to look at whether any portion might still qualify or if there are state-level tax benefits available.

After going through something similar with a property damaged in Hurricane Ian (not Michael btw, that was 2018), I found this amazing AI tool that helped analyze my tax situation and provided clarity on casualty loss deductions. Check out https://taxr.ai - it actually reviews your specific tax documents, IRS correspondence, and determines whether you might have grounds for appeal based on your exact situation. For me, it found that while my initial deduction was denied, I had evidence of attempting to get insurance (rejection letters) that strengthened my case. The tool analyzed my documentation and helped me draft a proper response to the IRS with the right tax code citations. Super helpful when dealing with complicated disaster tax situations like this.

I was really skeptical about using an AI tax tool like taxr.ai, but after getting nowhere with three different tax preparers on my Hurricane Ian casualty loss situation, I decided to give it a shot. I uploaded my denial letter from the IRS and the documentation showing I had tried to get insurance (but was declined due to the property's location). The tool actually identified a specific IRS memo from 2019 that addressed situations where insurance was "not reasonably available" - something none of my tax pros had mentioned! With this information, I was able to file an appeal with the proper documentation and references, and the IRS actually reversed their decision on my casualty loss deduction. Not saying it will work for everyone, but it definitely helped in my situation where the casualty loss deduction was denied specifically because of the insurance issue.

Since you're dealing with the IRS denying your deduction, you might want to try speaking directly with an IRS agent about this. I was in a similar situation (though with a different type of deduction) and spent WEEKS trying to get through to a human at the IRS. Eventually I found https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes instead of the usual hours of hold times. You can see how it works at https://youtu.be/_kiP6q8DX5c I was able to explain my situation directly to the agent who helped me understand exactly why my deduction was denied and what documentation I would need to provide to potentially reverse the decision. Sometimes you just need to speak to the right person to get clear guidance.

I've got to eat my words here. After being super skeptical about Claimyr in my reply above, I was desperate enough to try it last week for my own tax issue. I actually did get connected to an IRS agent in about 15 minutes, which was shocking after my previous attempts that went nowhere. The agent I spoke with explained that for casualty losses on second homes, they are technically deductible in federally declared disaster areas, BUT there's a "reasonable and prudent person" standard applied to insurance. Basically, if a reasonable person would have insured the property given its location, the IRS can deny the deduction if you didn't have insurance. However - and this might help the original poster - the agent also mentioned that if you can document attempts to obtain insurance that were denied or quoted at prohibitively expensive rates, that documentation can be submitted with an appeal to potentially reverse the decision. Worth a shot if that applies to your situation.

I went through something similar with Hurricane Ian damage to my Naples vacation property. Make sure you're using Form 4684 correctly for the casualty loss calculation. One thing I learned is that you need to be calculating based on the lesser of: 1) The adjusted basis in the property before the casualty 2) The decrease in FMV due to the casualty Since you mentioned your FMV is higher than your cost basis, you would use your adjusted basis for the calculation, not the FMV drop. Also, don't forget the $100 floor per casualty and the 10% of AGI limitation that applies.

Has anyone successfully appealed an IRS denial for casualty loss due to no insurance? My CPA said we should just give up but I'm wondering if it's worth fighting.

Carmen, I'm really sorry to hear about your situation with the Fort Myers property. One thing that might help is checking if you have any documentation showing you attempted to get insurance or were quoted unreasonably high premiums. Based on what others have shared here, the IRS sometimes accepts appeals when you can prove insurance was genuinely unavailable or prohibitively expensive. Also, since this was Hurricane Michael, you might want to double-check the timeline - that hurricane hit in 2018, so depending on when you filed your taxes, there might be amended return options still available. The casualty loss rules have changed several times in recent years, and you might have more options than your initial denial suggested. Have you considered reaching out to a tax attorney who specializes in disaster-related tax issues? Sometimes the appeal process requires very specific documentation and legal arguments that general tax preparers aren't familiar with. Given the significant financial impact you mentioned, it might be worth the investment to get professional help with the appeal.

Carmen, I'm really sorry about your Fort Myers property situation. One thing I haven't seen mentioned yet is the possibility of partial insurance documentation. Even if you didn't have active coverage when Michael hit, if you can show you had previously inquired about insurance and were either denied or quoted astronomical rates, that documentation might still be valuable for an appeal. Also, since Fort Myers is in a high-risk hurricane zone, you might want to look into whether your mortgage lender required insurance at any point. Sometimes lenders have records of insurance requirements or waivers that could support your case that coverage was either unavailable or unreasonably expensive. The fact that this was a federally declared disaster does carry weight, and the "reasonable and prudent person" standard the IRS applies can sometimes work in your favor if you can demonstrate that obtaining insurance wasn't actually reasonable given your specific circumstances. Don't give up without at least documenting what insurance options (if any) were actually available to you at the time.

Carmen, I'm so sorry about your Fort Myers property - hurricane damage without insurance is absolutely devastating financially. Based on what I'm reading in the other comments, it sounds like you might still have some options worth exploring. The key issue seems to be proving that insurance was genuinely unavailable or unreasonably expensive for your property. If you can document that you tried to get coverage and were either denied or quoted premiums that were prohibitively high (some people mentioned 15% of property value annually as a benchmark), you might have grounds for an appeal. A few practical steps that might help: 1. Contact your mortgage lender for any records about insurance requirements or waivers for your property 2. Reach out to Florida's insurance commissioner's office - they may have documentation about insurance availability in Fort Myers for hurricane coverage 3. Try to get written statements from insurance companies about their coverage policies for properties in your area during the relevant time period Also, since Hurricane Michael was in 2018, make sure you understand the timeline for any appeals or amended returns. The casualty loss rules have changed significantly in recent years, and you want to make sure you're not missing any deadlines. Given the significant financial impact, it might be worth consulting with a tax attorney who specializes in disaster-related tax issues before giving up completely. The appeals process requires very specific documentation and arguments that general tax preparers often aren't familiar with.

Carmen, I'm really sorry to hear about your situation with the Fort Myers property. Hurricane damage without insurance coverage is incredibly stressful, both financially and emotionally. From what I've read in the other responses, it sounds like you might still have some viable options for appealing the IRS denial. The key seems to be documenting that insurance was genuinely unavailable or prohibitively expensive for your specific property and location. A few suggestions that might help strengthen your case: 1. **Gather insurance documentation**: Even if you didn't have active coverage, try to collect any records showing you inquired about insurance and were either denied or quoted unreasonable rates. Contact multiple insurance companies that operate in Florida and ask for written statements about their coverage policies for properties in Fort Myers hurricane zones during 2018. 2. **Check with your mortgage lender**: If you had a mortgage on the property, your lender might have records showing they waived insurance requirements due to unavailability, or documentation of their own struggles to secure required coverage. 3. **Contact Florida's insurance authorities**: The Florida Office of Insurance Regulation or Citizens Property Insurance Corporation might have records or can provide official statements about insurance availability in your specific area during the relevant time period. The "reasonable and prudent person" standard the IRS applies can sometimes work in your favor if you can demonstrate that a reasonable person in your situation genuinely couldn't obtain coverage. Don't give up without exploring these documentation options - the financial impact is too significant to not exhaust all possibilities. Given the complexity and the money involved, consulting with a tax attorney who specializes in disaster-related casualty losses might be worth the investment. They'll know exactly what documentation the IRS expects and how to structure an appeal properly.

Carmen, I'm so sorry about your Fort Myers property - dealing with hurricane damage without insurance is incredibly stressful, and then having the IRS deny your casualty loss deduction just adds insult to injury. From reading all the responses here, it seems like you might have more options than you initially thought. The key issue appears to be proving that insurance was genuinely unavailable or unreasonably expensive for your specific property. The IRS applies a "reasonable and prudent person" standard, but if you can document that a reasonable person in your situation couldn't have obtained coverage, you might have grounds for a successful appeal. I'd suggest starting by gathering any documentation you can find about insurance inquiries you made (even informal ones) and reaching out to insurance companies for written statements about their coverage policies for Fort Myers hurricane zones in 2018. Your mortgage lender might also have relevant records if you had financing on the property. Given the significant financial impact and the complexity of casualty loss appeals, it might be worth consulting with a tax attorney who specializes in disaster-related tax issues. They'll know exactly what documentation the IRS expects and how to structure your appeal properly. Don't give up without exploring all these documentation options - the money involved makes it worth the effort to exhaust every possibility. The fact that this was a federally declared disaster area does carry weight in your favor, and several people here have shared success stories with similar appeals when proper documentation was provided.

Carmen, I'm so sorry to hear about your Hurricane Michael damage in Fort Myers - what a devastating situation to face without insurance coverage. After reading through all the helpful responses here, it really seems like you shouldn't give up on this casualty loss deduction just yet. The key insight I'm getting from everyone's advice is that the IRS's "reasonable and prudent person" standard can actually work in your favor if you can prove that insurance genuinely wasn't available or was prohibitively expensive for your specific property. Since Fort Myers is in a high-risk hurricane zone, there's definitely precedent for properties being uninsurable through normal channels. I'd strongly recommend starting with these concrete steps: - Contact multiple Florida insurance companies for written statements about their coverage policies for hurricane-prone Fort Myers properties in 2018 - Check with your mortgage lender for any records about insurance requirements or waivers for your property - Reach out to Florida Citizens Property Insurance Corporation to see if you applied there or if they have records about coverage availability in your area - Document any informal insurance inquiries you made, even if you don't have official rejection letters Given that this represents a significant financial loss and the rules around casualty losses are quite complex, consulting with a tax attorney who specializes in disaster-related tax issues would probably be worth the investment. They'll know exactly how to structure an appeal and what documentation the IRS will find most compelling. Don't let your CPA's pessimism discourage you - several people here have shared success stories with similar appeals when proper documentation was provided. The fact that this was a federally declared disaster definitely works in your favor.