My home was destroyed in a federally declared disaster area in 2008. The insurance didn't fully compensate me for my loss. Can I deduct the rest of my loss?

My home was destroyed in a federally declared disaster area in 2008. The insurance didn’t fully compensate me for my loss. Can I deduct the rest of my loss?

If you have a loss in a federally declared disaster area that is not covered by insurance, you may be able to claim a casualty loss deduction. The tax rules for losses in federally declared disaster areas in 2008 and 2009 have changed. For 2008 losses, only the first $100 is not deductible (for 2009 losses, there will be a $500 threshold); the balance is fully deductible, either as an itemized deduction or as an above-the-line deduction, at your choosing. The old 10%-of-AGI floor that had applied prior to 2008 is waived for these 2 years.

Note: Casualty losses that do not result from a federally declared disaster area do not benefit from these new rules (i.e., losses must exceed $100 and 10% of AGI to be deductible and can be claimed only as itemized deductions).