H&R Block Income Tax Practice Exam 2026 – Complete Prep Guide

A deductible casualty loss must exceed 10% of the taxpayer's adjusted gross income (AGI) to be claimed as a deduction on an individual's tax return. This requirement is in place to ensure that only significant losses that substantially affect the taxpayer's financial situation can be deducted, thereby limiting the impact of minor losses that might not significantly influence tax liability.

To claim a casualty loss, taxpayers first determine the loss amount and then apply the 10% threshold against their AGI. This means that only the amount of losses exceeding this threshold can be deducted, reflecting the intent of tax policy to assist taxpayers who suffer substantial financial setbacks.

Most losses from personal property must also be from a qualified event such as theft, fire, storm damage, or similar occurrences to qualify as deductible. While it's essential that the loss is significant and directly connected to a qualified event, the specific threshold of exceeding 10% AGI is what ultimately qualifies it for deduction on tax returns.