New Tax Act Reinstates Full Casualty Loss Deductions Retroactive to 2018, Extends Refund Deadlines

If you’ve ever had a pipe burst, a car stolen, or a fire rip through your home—and you know the pain of dealing with insurance deductibles and uninsured losses—this new legislation is for you. The Tax Relief for Victims of Crimes, Scams, and Disasters Act is essentially a major do-over for victims of personal property losses over the last few years.

The Big Fix: Bringing Back the Casualty Deduction

For tax years starting after December 31, 2017, the federal deduction for personal casualty losses was severely restricted. Unless the loss was in a federally declared disaster area, you couldn't claim it. This bill wipes that restriction clean. Specifically, Section 2 removes the limiting language from the tax code, meaning that if your personal property was damaged or destroyed by a sudden, unexpected event—like a house fire, a major flood, or even a theft—and the loss wasn't covered by insurance, you can now deduct that loss again, regardless of where you live.

Think about the person who had a basement flood from a burst main in 2019, or the family who lost everything in a non-disaster-declared wildfire in 2021. Before this bill, they were mostly out of luck when tax time came. Now, they can claim that loss. This is a massive financial relief mechanism being reopened for everyday folks who suffer unexpected setbacks.

Opening the Door to Retroactive Refunds

One of the most important parts of this bill, detailed in Section 3, is the extension of time to claim refunds. Since the deduction is being reinstated retroactively to 2018, many people who suffered losses between 2018 and now missed out on this tax break. Normally, you only have three years to file an amended return and claim a refund.

This bill throws out that normal deadline for casualty losses. If you filed a return for any year ending before January 1, 2025, and you couldn’t claim a casualty loss deduction because of the previous restrictions, you now have until the due date of your tax return for the year this law is enacted to file for that refund. This means if you had a qualifying loss in 2018, 2019, 2020, or any year up to 2024, you can likely go back and amend those returns to claim the money you missed.

This is huge for people who were previously penalized for suffering an uninsured loss. It gives them a real, tangible chance to recover some of that money and finally put the financial damage behind them. It’s a practical move that recognizes that when disaster strikes, people need more than the standard three-year window to get their finances sorted out.