Florida's 2024 hurricane season left many property owners dealing with significant damage. After the winds and floods passed, these owners were left not only with repairs but also questions about financial recovery. One form of relief might be a tax deduction for a casualty loss – essentially, the loss in your property’s value due to the hurricane. To claim this, you document the loss on IRS Form 4684, which is where a casualty loss appraisal comes into play.

What Is a Casualty Loss Appraisal?

Casualty losses are losses from sudden, unexpected events like hurricanes, floods, or fires that damage your property. If your home or other personal-use real estate in Florida was damaged by a 2024 hurricane (in a federally declared disaster area), you may be eligible to deduct the loss in value on your federal taxes. IRS Form 4684 (Casualties and Thefts) is used to calculate and report that loss. But how do you figure out the dollar amount of your property’s loss? This is where a casualty loss appraisal is critical. A casualty loss appraisal is a professional assessment of your property’s fair market value immediately before the casualty and immediately after. The difference between those two values represents your property’s decrease in value due to the disaster

In other words, it tells you (and the IRS) how much value your property lost because of the hurricane.

Form 4684 will ask for the fair market value (FMV) of your property before and after the casualty. The IRS defines FMV as the price a willing buyer would pay a willing seller for the property, with both having reasonable knowledge of the facts

For most homeowners, determining these values isn’t straightforward—you typically won’t know exactly what your home was “worth” right before and after the storm. That’s why the IRS and tax professionals often rely on a qualified appraisal to establish those numbers. According to IRS instructions, FMV is generally determined by a competent appraisal, considering sales of comparable properties around the time of the casualty and the specifics of your property’s condition In short, a casualty loss appraisal provides the official valuations needed to fill out Form 4684 accurately and substantiate your deduction.

Calculating Fair Market Value Before and After a Disaster

Calculating your property’s fair market value before and after a hurricane involves more than just guessing or looking at Zillow. A professional appraiser will assess your home’s condition, review comparable sales, and factor in the local real estate market to determine what your property was worth immediately before the damage and immediately after. The difference is your loss in value due to the casualty (subject to certain tax limits like your cost basis and insurance reimbursement).

It’s important to note that the appraisal must isolate the loss due to physical damage. The IRS explicitly instructs that the post-casualty appraised value must be adjusted to remove any general market decline that happened at the same time as the disaster

In plain English, this means the appraiser should not attribute a broad drop in market prices to your specific loss. For example, if an entire neighborhood’s property values fell because buyers became nervous about hurricane risks in that area, that general drop is not part of your individual casualty loss. Only the value drop caused by actual damage to your property counts. A qualified appraiser will understand this distinction and ensure your before-and-after values reflect solely the impact of the damage, not unrelated market fluctuations.

Example: Suppose your home was worth $300,000 before a hurricane. After the storm, with a torn roof and water damage, its value might be only $240,000. At first glance, it seems you lost $60,000 in value. However, imagine the hurricane also caused a general decline in home prices in your area (say, about 5% because the whole region was impacted). If similar undamaged homes went from $300,000 to $285,000 due to the market’s reaction, then your $60,000 drop isn’t entirely due to your property’s specific damage. The appraiser would adjust for that market effect – meaning they might conclude your home’s value after the physical damage (excluding the general market dip) would have been around $255,000. Thus, the loss attributable to your property’s damage would be $300,000 minus $255,000 = $45,000. This is the number that would go on your Form 4684 as the casualty loss (before any insurance or other adjustments). The key is that the appraisal parses out what portion of the value loss was due to your house’s damage versus the overall market downturn.

Using Repair Costs as Evidence of Loss

What if you’ve already started repairs? The IRS recognizes that repair bills can sometimes serve as evidence of your property’s loss in value. However, you can’t simply take any repair estimate and call that your loss – specific criteria must be met for the “cost of repairs” method to be valid. According to IRS guidelines, you may use the cost of repairs as proof of the decrease in value if and only if you meet all of the following conditions:

• The repairs are actually made: You must actually complete the repairs on the property.

• Repairs restore the property to its pre-casualty condition: The work done should bring your home back to the way it was immediately before the hurricane.

• The repair costs are not excessive: The amount you spend should be reasonable and necessary, not inflated.

• Repairs only fix the hurricane damage: You can’t include upgrades or unrelated improvements. The repairs should address only the damage caused by the casualty.

• Repairs don’t improve the property beyond its original value: After repairs, the property’s value should not be higher than it was before the disaster. In other words, you haven’t added value—just restored what was lost.

If all of these conditions are met, the total cost of repairs can be used as a measure of how much value was lost. This makes sense because if you fully restore your home to its prior condition, the money you spent should correspond to the value it lost (as long as you didn’t over-improve). Keep in mind, the repair-cost method is mainly useful as supporting evidence. You would keep copies of receipts and contractor bills to show the IRS if needed. Also note that if your insurance reimbursed you for some repairs, your deductible loss would be reduced by that amount.

For many large losses, especially if repairs are not completed by tax time, a professional appraisal is still the primary way to determine the drop in value. The repair costs method is just alternative evidence to bolster your claim. If your repairs meet the above criteria, you can use those figures on Form 4684 as evidence of the decline in FMV. But if the situation is complex (partial repairs, improvements mixed in, or market value shifts), it’s safest to get an expert appraisal.

Your Entire Property Is One “Item” for a Casualty Loss

When dealing with personal-use real estate (like your primary home), the IRS treats your property as one single asset for the casualty loss calculation. This means all the components of your property – the land, the house, the garage, the pool, the trees and landscaping, etc. – are considered together as one item for measuring the loss You do not calculate separate losses for each feature or improvement on that real estate. For example, you wouldn’t list the damage to your roof as one casualty loss and the damage to your fence as another. They’re part of the overall property loss. The logic here is that your home and its attached structures/improvements collectively contribute to the property’s value. So, you assess the decrease in value of the property as a whole. The appraisal will determine how the entire property’s market value changed due to the hurricane. (Personal belongings, however, are treated separately. If you also had damage to contents – say furniture or electronics – those would be itemized individually on Form 4684. The IRS gives an example that you would figure the loss separately for each piece of furniture, but not for parts of the real estate.)

For Florida homeowners, it’s important to understand this “one property, one loss” approach so you don’t mistakenly try to break out losses by component. On your tax forms, you’ll combine the damage to your house, landscaping, and other fixtures into one calculation for that property. This also means the $100 deductibility threshold (and the 10%-of-AGI rule if applicable) is applied per overall event, not per item, so you can’t bypass it by splitting items. The appraisal report you obtain will reflect the total impact on your property’s value, which is exactly what the IRS wants to see for a personal-use casualty loss.

Why a Qualified, USPAP-Compliant Appraisal Matters

A casualty loss appraisal isn’t just any home valuation – it needs to be done right. The IRS mentions using a “competent appraisal” for a reason. A qualified appraiser who is USPAP-compliant will ensure that the appraisal stands up to scrutiny. USPAP (Uniform Standards of Professional Appraisal Practice) is the industry’s code of ethics and guidelines that appraisal professionals follow to produce credible, unbiased valuations. When an appraisal is USPAP-compliant, you can trust that it has documented all the necessary steps, considered all relevant market evidence, and followed standardized methods. This level of professionalism is important not only for your own peace of mind but also if the IRS ever questions your casualty loss claim.

Remember, the goal of the appraisal is to prove your loss in value. An appraiser with experience in casualty loss valuations will know how to document the pre-disaster value (often using comparable sales from before the hurricane or reconstructed data) and the post-disaster value (accounting for the damage, as well as any repair estimates, and excluding general market drops as discussed earlier). The appraiser’s written report will typically include photographs of the damage, descriptions of your property’s condition, the methodology used to determine values, and references to comparable sales. This report becomes your evidence that “Yes, I really did lose $X in property value due to this hurricane.”

Using a qualified, independent appraiser also adds credibility. It shows you didn’t just come up with a number to maximize your tax deduction; a trained professional calculated it. In the event of an audit or review, a solid appraisal report can make all the difference. It’s worth noting that while appraisals cost a fee, they can potentially save you much more in taxes (and protect you from penalties for inaccurate claims). As the old saying goes, “document, document, document” – and a USPAP-compliant appraisal is the gold standard documentation for a casualty loss deduction.

How Cliggitt Valuation Can Help

Dealing with the aftermath of a hurricane is stressful enough without having to become a tax or appraisal expert overnight. That’s where Cliggitt Valuation comes in. We understand both the local real estate market and the specific requirements for casualty loss valuations. We regularly perform IRS-compliant casualty loss appraisals for homeowners and property owners looking to maximize their eligible deductions after disasters. Our reports are prepared in accordance with USPAP standards and tailored to meet IRS guidelines, so you can confidently use them in support of your Form 4684 claims.

We will walk you through the process: inspecting your property, researching market data, and explaining our findings in plain language. You’ll get an appraisal that not only provides the before-and-after values of your property, but also clearly documents how those values were determined. This gives you, your tax preparer, and the IRS a transparent record of your loss.

Don’t navigate the casualty loss process alone. If your Florida property was damaged in the 2024 hurricane season, let us help you assess and document your loss accurately. With our qualified team on your side, you can focus on rebuilding, while we handle the valuation details. Here’s to a smoother recovery and the confidence of having experts support your claim every step of the way.

Thank you for your interest. Have questions regarding the local market? Navigate the Real Estate Market with confidence, and contact us at Cliggitt Valuation for your appraisal, consulting, and valuation needs today.

Mike Cliggitt, MAI, MRICS, CCIM

813.405.1705 | 863.661.1165 - Direct Lines

findvalue@cliggitt.com

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