For rental properties, when can a tax deduction for casualty losses be claimed?

A tax deduction for casualty losses on rental properties can be claimed to the extent that the loss is not covered by insurance. This means that if a rental property suffers damage due to a casualty event, such as a fire or natural disaster, and the insurance payout does not cover the entire loss, the property owner can deduct the uncovered portion of the loss from their taxable income.

This approach is based on the principle that taxpayers are allowed to deduct losses that they have actually incurred. If the loss is fully covered by insurance, there is typically no economic loss for the owner; thus, there would be no basis for claiming a tax deduction. If a taxpayer were to claim a deduction regardless of insurance coverage, it would incorrectly reflect their financial situation, as the insurance payment mitigates the actual economic impact of the loss.

The requirement that losses must exceed a certain amount to qualify for deduction is more relevant to some other tax issues but does not apply in this case for claiming casualty losses, making it inappropriate as a correct choice.