Tax relief for casualty losses has been part of the Internal Revenue Code since the beginning. Though updated and revised over the years, the general rule endures: When you suffer a sudden, unexpected loss, you may be eligible for a deduction that can reduce your current tax, or in some instances, your prior-year liability.

Here are three categories of losses.

• Business. Casualties affecting the value of property, equipment, or other assets in your for-profit trade or business are deductible. Generally, the amount of your loss depends on the decrease in fair market value or the adjusted tax basis of the asset.

• Investment. Losses you incur when seeking a profit that's not connected with your trade or business may be deductible. While this does not include declines in the value of stock you own due to normal market fluctuations, Ponzi schemes can fit into this category. Under a special ruling, you can deduct investment losses from Ponzi schemes as a theft of income-producing property.

• Personal. When your personal property is damaged or destroyed as the result of a fire, storm, shipwreck, or other casualty, you might be eligible for an itemized deduction. Remember that to qualify as a casualty loss, the event has to be sudden and unexpected, such as a tornado or other natural disaster. Damage from corrosive drywall also qualifies.

Give us a call if you think you can claim a casualty, disaster, or theft loss. In some cases, we can amend prior year returns for a quick refund.