Missile Damage in Israel? U.S. Tax Relief May Apply

Missile Damage in Israel? U.S. Tax Relief May Apply

While I sincerely hope no one reading this will ever need to act on this advice, those of you affected by Iranian missile attacks should know: you may qualify for a casualty loss deduction on your U.S. tax return.

If you’re a U.S. citizen or green card holder living in Israel, and your home or property was damaged, the IRS may allow you to deduct the loss from your taxable income — but there are important rules and caveats.

IRS Disaster Declaration Expected

It’s highly likely the IRS will declare Israel a federal disaster zone for this time period. Once that happens, personal-use property losses (like a damaged home) may become deductible on Schedule A. Rental or business property losses are usually deductible even without that declaration.

Deduction, Not a Refund

This is a deduction — not a direct payment. It reduces your income subject to tax, which can lower your bill or increase your refund.

Insurance or Government Aid?

If you were reimbursed (even partially) by:

Homeowners insurance

Israeli government emergency funds

Municipal grants

You must subtract those reimbursements. You can only deduct the unreimbursed portion.

How It Works (Personal Property):

Start with your cost basis in the damaged asset

Subtract reimbursements

Subtract $100

Subtract 10% of your AGI

The result is what you may deduct

Rental or Business Property:

No $100 or 10% reduction — the full unreimbursed loss may be deductible.

Be Prepared:

Gather photos of damage, insurance docs, repair estimates, and proof of original purchase/improvements. You’ll need them.

Timing:

Losses are generally claimed on your 2025 return, but you may elect to claim them on 2024 if it benefits you.

Important: If you’re reimbursed after claiming a loss, you may need to amend your return or report the reimbursement as income.

If part of your home is used for rental or business purposes (even a home office), that portion may qualify even if the rest doesn’t.