What is a casualty loss?

A casualty loss is where property is damaged, destroyed or lost because of an event that was either sudden, unexpected or unusual: (i) a sudden event is defined as an event that is swift, rather than being gradual or progressive; (ii) an unexpected event is defined as one that is usually unanticipated and unintended; and (iii) an unusual event is one that is not a day-to-day even and which is not typical of the activity you were engaged in at the time.

So, essentially, a deductible loss must be caused by some type of chance event or natural phenomenon. There are many things that could cause such a deductible casualty loss, including: earthquakes, hurricanes, landslides, fires, floods, damage from vandalism during a riot, shipwrecks, terrorist attacks or vandalism. A car accident can also qualify as a deductible casualty loss, as long as the accident was not due to your own willful act or negligence. To claim any casualty loss as a deduction, you should have adequate records proving the loss and the value of the property.

Nondeductible casualty losses would include damage caused by pets, damage caused by a fire you willfully set, broken glass or china (which broke under normal conditions), the damage or destruction of trees and plants by bugs and pests (unless there was an unusual infestation), and progressive deterioration. Progressive deterioration would include damage that occurs slowly, over time, such as property damage due to a termite infestation or erosion.