What this line means
The smaller of cost or FMV decrease (line 8) minus insurance and other reimbursements (line 3). This is your net unreimbursed loss before the $100 per-event reduction on line 10. If insurance covered the full damage, this line is zero and there is no loss to deduct.
Does this apply to you?
- You had a casualty or theft loss that was not fully covered by insurance
- You received partial insurance reimbursement and want to calculate the unrecovered portion
- You did not have insurance on the damaged or stolen property
Easy to overlook
Reimbursements received in a later year reduce the loss in the year of the casualty If you file your 2025 return claiming a casualty loss and then receive an insurance check in 2026, you need to amend 2025 to reflect the reimbursement. Alternatively, if you expect reimbursement, reduce the loss now and adjust later if the actual payment differs. Claiming the full loss and ignoring later reimbursement triggers an IRS adjustment. 1 IRS Publication 547 — Casualties, Disasters, and Thefts
Reimbursements exceeding line 8 create a gain, not a zero loss If your insurance payout exceeds the smaller of your basis or FMV decrease, the excess is a casualty gain. Report the gain on line 4, not on line 9. Line 9 cannot be negative — if reimbursement exceeds line 8, enter zero on line 9 and handle the gain separately. 2 IRS Form 4684 instructions — Line 9
Watch out for this
Subtracting only the insurance payment you received and ignoring other reimbursements. Line 3 includes all reimbursements: insurance, FEMA grants, employer disaster relief payments, charitable disaster assistance earmarked for your property repair, and any other source. Missing any reimbursement overstates the loss on line 9.
Footnotes
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IRS Publication 547, Casualties, Disasters, and Thefts, When to Report. https://www.irs.gov/pub/irs-pdf/p547.pdf ↩
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IRS Form 4684 Instructions, Line 9. https://www.irs.gov/instructions/i4684 ↩