Expiring Tax Provisions—Limitation on Casualty Losses

Published: Jul 25, 2025

Many TCJA provisions expire after 2025 — including limits on personal casualty loss deductions. Unless extended, losses will again be deductible starting Jan. 1, 2026

By David Donnelly, CPA-Houston  

 

There are dozens of tax provisions in the 2017 Tax Cuts and Jobs Act (TCJA) that expire on Dec. 31, 2025. Tax practitioners should be aware of the more important of these provisions—one of which is the treatment of personal casualty losses.  

 

Prior to the 2017 TCJA, personal casualty losses were deductible as an itemized deduction to the extent that the losses exceeded 10% of AGI.* The TCJA added Internal Revenue Code Section 165(h)(5), which states that personal casualty losses are not allowed after Dec. 31, 2017, and before Jan. 1, 2026, except for federally declared disaster areas. 

 

For many taxpayers, a material casualty loss is a financially devastating event whether it occurs in a federal disaster area or not. Softening the effect of these losses by allowing a tax deduction for the casualty losses goes back to the 1867 amendment to the Civil War income tax act and has been carried forward in various ways since then.   

 

The automatic expiration of the provisions of Code Section 165(h)(5) allows the deductibility of personal casualty losses after Dec. 31, 2026. Whether this will be allowed to happen will be a matter of political debate, which debate will include the rest of expiring provisions of the TCJA. Allowing the personal casualty deduction to come back into the law does seem taxpayer friendly and hopefully Congress will allow it.  

 

*This 10% of AGI limitation was waived for “Qualified Disaster Losses” that are defined statutorily to include Hurricanes Harvey, Irma, Maria, the California wildfires in 2017 and 2018, and certain other disasters between Dec. 28,2019, and before Dec. 27, 2020. The 10% AGI limitation continues in effect for “Federal Casualty Losses” and “Disaster Losses.” For these definitions, see the Page 1 of the 2023 Instructions for Form 4684.  

Topics:

You May be Interested in

  • The IRS May Owe Your Clients Money from the COVID Period
    Recent court decisions have opened a largely overlooked opportunity for significant tax refunds based on mandatory disaster relief under IRC Section 7508A during the federally declared COVID-19 disaster period. As a result, interest and penalties assessed during this period may be invalid and refundable, and some taxpayers who received refunds may also be entitled to unpaid overpayment interest. While uncertainty remains and the IRS may resist such claims, timely protective refund filings are critical to preserve clients rights as the statute of limitations continues to run.
  • TXCPA Advocates for Accounting’s Recognition in Definition of Professional Degrees for Student Loan Eligibility
    TXCPA submitted a formal comment to the U.S. Department of Education urging recognition of accounting as a professional degree program to protect graduate-level federal loan access and strengthen the future CPA pipeline.
  • The Verdict is In. The Texas Franchise Tax is GILTI, Raising New Questions and Potential Issues
    Beginning with the 2026 report year, the Texas Comptroller will align the franchise tax with the current Internal Revenue Code, likely requiring GILTI to be included in total revenue. This change raises sourcing, statutory and potential constitutional questions for businesses with foreign operations, creating new uncertainty and possible tax impacts.
More News

Support the Next Generation

Donate to TXCPA scholarships and help aspiring accountants achieve their goals.

Scholarships