Understanding Disaster Loss Valuation: A Guide for Property Owners

When a disaster damages your home or investment property, the IRS provides a way to recover part of your loss through Form 4684 – Casualties and Thefts. This form allows eligible taxpayers to report the decline in a property's market value due to a qualifying event such as a hurricane, flood, or other federally declared disaster. However, properly documenting that loss requires a qualified real estate appraisal.

Under IRS Form 4684, taxpayers can claim a deduction based on the difference between the property’s market value immediately before the disaster and its market value immediately after. This is where a qualified appraiser plays a vital role. Using methods aligned with the Uniform Standards of Professional Appraisal Practice (USPAP) and IRS requirements, the appraiser develops two values — one retrospectively (prior to the event) and one reflecting current damaged conditions. For example, in a recent analysis performed by Bluemark Valuation Advisors for a property in the Tampa Bay area, the pre-storm value was determined at $1,375,000 and the post-storm value at $875,000, resulting in a total estimated loss of $500,000. This quantification is central to supporting IRS Form 4684, as it establishes the deductible casualty loss resulting directly from the disaster event.

It is crucial to distinguish that the lost value must be attributable to the disaster itself — not to deferred maintenance, market fluctuations, or unrelated factors. Documentation such as photos, contractor estimates, and mitigation invoices should support the physical damage observed during the appraisal inspection.

In response to increasing storm losses, Rep. Greg Steube (FL-17) introduced the Federal Disaster Tax Relief Act, which seeks to expand the deductibility of disaster-related losses by eliminating adjusted gross income thresholds and easing filing restrictions. This legislation highlights growing federal support for impacted property owners and the importance of thorough valuation in disaster recovery.

Whether you are filing taxes or preparing legal documentation, obtaining a defensible and well-supported disaster loss appraisal ensures compliance and substantiates your claim under IRS Form 4684. Working with a credentialed appraiser who understands FEMA guidelines, IRS requirements, and market-based valuation ensures your loss is measured accurately — and fairly.

About Bluemark Valuation Advisors

Bluemark Valuation Advisors is a privately owned appraisal company dedicated to providing top-quality commercial and residential appraisal services, including reports, reviews, and portfolio valuations. For more information, contact us at 813-330-1339 or info@tampavaluation.com.

Meet Our Founder – Victor A. Torres, MAI

Victor A. Torres, MAI, is the founder of Bluemark Valuation Advisors and a highly experienced Senior Appraiser. With a background in providing exceptional commercial appraisal services across Puerto Rico, Georgia, South Carolina, and Florida since 2012, Victor specializes in a wide range of property types, including residential subdivisions, multi-tenant retail facilities, and industrial properties. Victor holds a Bachelor's degree in Accounting, is a State-Certified General in Florida and Puerto Rico, and is a respected Member of the Appraisal Institute.

Please note: I am a licensed real estate appraiser, not an attorney or CPA. This information is provided for general understanding only and should not be construed as legal or tax advice. Always consult with a qualified accountant or tax professional before making any financial or filing decisions related to disaster loss claims.