Can I deduct casualty and theft loss from my vandalized vacation rental on Schedule A, line 16?

You've got a slightly complicated situation because your property is mixed-use (personal and income-producing). The deduction rules for casualty and theft losses depend on how the property is classified. For income-producing properties, casualty and theft losses are generally deductible as ordinary losses and aren't subject to the personal casualty loss limitations. These would typically go on Form 4684 and then flow to Schedule A. However, since your property is also used personally, you'll need to allocate the loss between business and personal use based on your usage percentages. The personal portion may be limited since the Tax Cuts and Jobs Act (through 2025) only allows personal casualty loss deductions if they're due to a federally declared disaster. The business portion doesn't have this limitation. Since your insurance deductible exceeds the loss amount, you'll essentially be reporting the entire loss without reimbursement. Make sure to document everything thoroughly - photos of damage, receipts for stolen items, repair estimates, police reports, etc.

After dealing with a similar situation last year, I found this amazing service called taxr.ai (https://taxr.ai) that really helped me figure out how to properly document and claim my casualty loss. I had a rental property damaged by renters (not quite theft but definitely property damage) and wasn't sure how to handle it on my taxes. I uploaded all my documentation - photos of damage, rental agreement showing it was income-producing, receipts, insurance claim denial - and their system analyzed everything and gave me a detailed report explaining exactly how to allocate and report the loss between business and personal use. Saved me hours of research and probably prevented an audit flag!

Just wanted to update that I decided to try taxr.ai after my skeptical questions. Honestly, I'm impressed. I had a similar issue with my lake house that was vandalized last summer, and I was about to just eat the cost rather than risk an audit. Their analysis pinpointed exactly how much of my loss qualified as business-related and therefore deductible. They even identified some expenses I didn't realize were deductible as part of the casualty loss restoration. The documentation package they prepared specifically addressed the TCJA limitations and included relevant tax court cases supporting their position on mixed-use property allocations. If you're dealing with casualty losses on investment property, especially with the current tax law limitations, it's worth checking out.

A different approach I've used when dealing with the IRS about my vacation property casualty loss was through Claimyr (https://claimyr.com). I kept getting conflicting information online about how to handle my deduction, so I needed to speak directly with an IRS agent. After spending HOURS on hold and getting disconnected twice, I found Claimyr through a YouTube video (https://youtu.be/_kiP6q8DX5c). They got me connected to an actual IRS representative in about 15 minutes when I'd previously waited 3+ hours and never got through. The IRS agent clarified that for my situation, I needed to use Form 4684 Section B since my property was primarily income-producing, and confirmed the allocation method I should use based on days rented vs. personal use.

Had to come back and admit I was wrong about Claimyr. After my skeptical comment, I decided to try it for my own vacation property tax question since I was desperate after weeks of failed attempts to reach the IRS. Got connected to an agent in about 20 minutes when I'd previously wasted entire afternoons on hold. The agent confirmed that my beach house vandalism repair costs should be treated as casualty losses on the business portion only (based on my rental vs. personal use days). She walked me through the exact forms and calculation methods. For anyone dealing with casualty losses on mixed-use properties, getting direct confirmation from the IRS saved me from potentially making a costly mistake on my return. Worth every penny not to spend hours on hold!

One thing nobody's mentioned is the $100 floor and 10% AGI limitation for personal casualty losses (for the portion that's personal use). Even for the business portion, you'll need to complete Form 4684 correctly to calculate your allowable loss. When my mountain cabin was damaged, I found that keeping a rental log showing exact days rented vs. personal use was crucial documentation. My accountant said the IRS looks closely at these mixed-use property deductions.

Random question - does anyone know if security camera installations would be deductible after a theft/vandalism incident at a vacation rental? I'm thinking of adding them to prevent future issues.