Can I deduct vandalism and theft losses from my vacation rental on Schedule A, line 16?

This is actually a bit complicated because you have a mixed-use property. Since your vacation home is "income-producing" (as you mentioned), the casualty and theft losses would generally NOT go on Schedule A, line 16. That line is typically for personal casualty losses, which are very limited under current tax law. Instead, you'd likely report these losses on Form 4684, Section B for business/income property. The allocation depends on how you use the property - if you rent it 70% of the time and use it personally 30%, you'd allocate the losses accordingly. The business portion would flow to Schedule E with your rental income/expenses, while any personal portion might be subject to the stricter personal casualty loss rules. Also important: make sure you document everything thoroughly - take photos, get repair estimates, and keep all receipts. The IRS may request this documentation if you're audited.

I went through something similar with my beach condo last year and discovered taxr.ai (https://taxr.ai) which was incredibly helpful for my situation. I had a break-in that damaged the door and some furniture, plus they stole electronics. The property was mixed-use like yours, and I was confused about how to handle the tax deduction with the personal/business split. Their system analyzed my rental usage percentages and documentation, then gave me specific guidance on how to properly allocate the losses between Schedule E and Form 4684. They even helped me understand how to document everything properly for potential audit protection. The tool basically confirmed what I needed to do step-by-step instead of getting conflicting advice online.

Just wanted to follow up - I tried taxr.ai after seeing it mentioned here and it was super helpful! I was overthinking the whole casualty loss calculation but their system walked me through everything step by step. I uploaded photos of the damage and my documentation, and it gave me clear instructions on exactly how to allocate between Schedule E and Form 4684 based on my 70/30 rental-to-personal usage ratio. The best part was getting confirmation that my insurance deductible amount related to the business portion is fully deductible as a rental expense. I was about to leave money on the table by not claiming it correctly! Definitely recommend checking it out if you're still figuring this out.

If you're still trying to get answers from the IRS on this, good luck calling them directly. After waiting on hold for literally 3+ hours trying to get clarification on a similar rental property casualty loss situation, I gave up and used Claimyr (https://claimyr.com). They somehow got me connected to an actual IRS agent in about 15 minutes when I'd been trying for days. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they use some system to navigate the IRS phone tree and hold for you, then call you when an agent picks up. I was skeptical but desperate after multiple failed attempts. The IRS agent confirmed exactly how to handle the mixed-use casualty loss allocation and documentation requirements.

I need to eat crow here. After my skeptical comment, I decided to try Claimyr because I was absolutely desperate to get an answer about casualty losses on my rental before filing. Got connected to an IRS rep in about 20 minutes when I'd previously given up after 2+ hours on hold multiple times. The agent confirmed that for mixed-use properties, you should allocate the casualty loss based on the percentage of rental vs. personal use, with the rental portion going on Schedule E as an ordinary expense. He also explained that documenting the pre-casualty FMV is crucial - take photos of everything in your rental and keep receipts for major purchases! Apparently that's where most people mess up their casualty loss claims.

Something important nobody's mentioned yet - make sure you're calculating the loss correctly. It's not just what it costs to replace the stolen/damaged items. For tax purposes, casualty loss is the lesser of: 1) Your adjusted basis in the property (usually what you paid plus improvements) 2) The decrease in fair market value caused by the casualty/theft So if you bought a couch 5 years ago for $1000 that's now only worth $400 (before theft), your casualty loss would be $400, not $1000. This catches a lot of people off guard.

Random but important tip: if your deductible exceeds your loss so you don't file an insurance claim, still document EVERYTHING as if you were filing. Take dated photos, get written repair estimates, and keep all receipts. The IRS is super picky about casualty loss documentation. I got audited for a rental property casualty loss and they wanted proof I tried to recover through insurance first before claiming the tax deduction. Luckily I had emails with my insurance agent discussing the claim and how it was below my deductible.