How to Complete Casualty Loss Form 4684 After Hurricane Damage and Insurance Shortfall

Yes, you might be able to claim a casualty loss on Form 4684, but there are several requirements you need to meet first. Casualty losses for personal-use property are only deductible if they're from a federally declared disaster area. Was your hurricane officially declared a disaster by FEMA? If it was a federally declared disaster, you'll need to calculate your loss by comparing the decrease in fair market value (FMV) of your property from before and after the hurricane, minus the insurance reimbursement you received. The difference between your contractor quotes ($43k) and insurance payout ($24k) doesn't automatically become your casualty loss - it's a bit more complicated than that. Also, remember there are thresholds: you need to reduce your total casualty loss by $100, and then the remaining amount is only deductible to the extent it exceeds 10% of your adjusted gross income (AGI). So depending on your income, you might not get much benefit even if you qualify.

After going through something similar with flood damage last year, I found that using taxr.ai https://taxr.ai really helped me navigate the Form 4684 nightmare. I was in the same boat where insurance only covered about 60% of my actual damages, and I wasn't sure how to document everything properly for the IRS. The tool analyzed all my insurance paperwork, contractor estimates, and photos to help calculate the exact deduction I was eligible for. It even flagged that I needed to get a statement from my insurance company confirming they wouldn't cover the additional damage, which I didn't realize was important documentation for my casualty loss claim.

I was really skeptical about using tax tools for something as complicated as casualty losses, but I decided to try taxr.ai after seeing it mentioned here. My situation was similar - tornado damage with a $18k gap between insurance payout and actual repair costs. The process was much easier than I expected. I uploaded my insurance settlement statement, contractor quotes, and some photos of the damage. The system flagged exactly what additional documentation I needed and calculated my eligible loss amount after all the AGI limitations. To my surprise, even after the 10% AGI reduction, I still qualified for a decent deduction. The best part was getting confirmation that my documentation would meet IRS requirements if I got audited. Definitely made me feel more confident about claiming the loss on my taxes this year.

If you're having trouble reaching the IRS to get clarification on Form 4684 and casualty losses, I'd recommend trying Claimyr https://claimyr.com - there's also a video showing how it works at https://youtu.be/_kiP6q8DX5c. I spent DAYS trying to get through to the IRS about my hurricane damage claim last year and kept hitting those automated systems that disconnect you. Claimyr got me connected to an actual IRS agent in about 20 minutes who walked me through exactly how to document my casualty loss when insurance didn't cover everything. Turns out I was filling out Section A wrong and would have lost a significant deduction. The agent also explained what documentation I needed to keep for substantiating the difference between insurance coverage and actual repair costs.

I need to eat my words from yesterday. After being completely skeptical about Claimyr, I tried it this morning out of desperation. I've been trying to reach someone at the IRS about Form 4684 casualty loss rules for my hurricane damage for WEEKS with no luck. They actually got me through to a real IRS agent in about 35 minutes! The agent confirmed that I CAN claim the difference between insurance payout and actual repair costs as long as I have proper documentation. She also explained exactly what evidence I need to keep to support my claim (appraisals, before/after photos, contractor estimates, insurance denial letters). I'm honestly shocked this worked. Saved me so much frustration and I finally have clear answers about how to handle the $23k gap between my insurance payout and actual repair costs.

I filed Form 4684 last year after a hurricane and learned some important things. First, take TONS of pictures - before, during, and after repairs. Second, get written statements from multiple contractors about repair costs. Third, make sure you have something in writing from your insurance company stating they won't cover the additional amount. For the decrease in FMV, I ended up hiring an appraiser who did a before/after analysis based on comparable properties and documentation of the damage. Cost me $400 but was worth it because it gave me a solid number that wasn't just based on repair costs. The IRS can be picky about accepting contractor estimates alone.

Has anyone used TurboTax for filing Form 4684? I'm in a similar situation where my insurance only covered about 70% of my actual hurricane damage costs. I'm trying to figure out if I should attempt this myself or hire a professional.

I went through this exact same situation after Hurricane Ian hit my area. The key thing to remember is that you need to calculate the "decrease in fair market value" of your property, not just the difference between repair costs and insurance payout. In your case, since you had to downgrade from a functioning chimney to just a wall, you'll need to document how this affected your home's overall value. I'd recommend getting a written statement from a local real estate agent or appraiser showing how the loss of a chimney impacts your home's market value compared to similar homes with chimneys. Also, make sure you get a written statement from your insurance company confirming they won't cover the additional $19k for full chimney replacement. This documentation is crucial for your Form 4684 filing. With your $78k AGI, you'll need to exceed $7,900 in total losses (after the $100 reduction) to get any deduction, but it sounds like you should easily clear that threshold. Keep all your contractor quotes, photos of the damage, and any correspondence with your insurance company. The IRS will want to see a clear paper trail showing the damage, the insurance settlement, and why you couldn't restore the property to its original condition.

I dealt with a similar situation after Hurricane Laura damaged my roof and garage. One thing that really helped my case was getting a "scope of loss" document from a public adjuster who reviewed what my insurance company missed or undervalued. Even though I had to pay the adjuster, it was worth it because they found an additional $12k in damages that insurance initially overlooked. For your chimney situation, you might want to consider getting a structural engineer's assessment showing that removing the chimney versus rebuilding it creates a permanent decrease in your home's structural integrity and value. This could strengthen your FMV decrease argument beyond just the aesthetic/functional loss. Also, don't forget that you can deduct the cost of temporary protective measures you took immediately after the hurricane (like tarping, boarding up windows, etc.) as part of your casualty loss. These often get overlooked but they're legitimate disaster-related expenses. Just make sure everything was within a reasonable timeframe after the federally declared disaster.

I went through a very similar situation after Hurricane Michael hit our area. One crucial detail that hasn't been mentioned yet - make sure you understand the timing rules for casualty loss claims. Since yours was a federally declared disaster, you actually have the option to claim the loss on either your 2024 return (the year it happened) OR amend your 2023 return to claim it there, which could get you a refund faster. The key documentation you'll need beyond what others have mentioned is a detailed timeline showing when the damage occurred, when you received the insurance settlement, and when you made the decision to go with the wall replacement instead of full chimney rebuild. The IRS wants to see that you made reasonable efforts to restore the property but were financially unable to do so. For your specific situation with the chimney-to-wall conversion, I'd strongly recommend getting an appraisal or real estate professional's written opinion on how this impacts your home's resale value. A missing chimney can affect both the aesthetic appeal and functionality (no fireplace option for future buyers), which supports your FMV decrease calculation. One last tip - if you're planning to sell your home within the next few years, keep all this casualty loss documentation. It could affect your capital gains calculation since the casualty loss reduces your home's adjusted basis.