Snakes On A Tax Return—Why You Can’t Deduct Damage From A Snake-Infested House On Your Tax Return

Earlier today, my husband asked me if I had heard about the woman who bought a house… “Stop right there,” I interrupted him. “I already know what you’re going to say. And please don’t say it.”

House Of Snakes

The story of Amber Hall, who bought her first home in Colorado earlier this year, only to discover that it was filled with snakes, had already made it onto my social media timelines.

Many folks responded as I did, “Burn it all down.”

The lawyer in me feels compelled to point out that I am not advocating that homeowners commit insurance fraud. But the scaredy-cat in me understands the temptation to do almost anything other than live in a house full of snakes.

Here’s what happened. About two weeks after moving into her new home, one of Hall’s dogs called attention to a snake near her home. Shortly afterwards, she discovered it wasn’t an isolated event—her walls were filled with snakes.

So far, Hall’s “snake wranglers” have helped catch between 20 and 30 snakes inside the garage—the snakes aren’t poisonous, but they are big, about two to four feet long. She keeps finding more. Pest inspectors have advised they believe hundreds of snakes have been living in a den under the house for about two years.

The solution? Hall must tear apart her deck and the surrounding concrete to reach the den to move the snakes out. That, she explains, will be costly.

Unfortunately for Hall, those repairs won’t be tax-deductible. A longstanding rule allowing homeowners to deduct casualty losses on a federal tax return no longer applies. Under the Tax Cuts and Jobs Act (TCJA), casualty losses for individuals are now only deductible to the extent they are attributable to a federally declared disaster.

Historic Deductions For Casualty Losses

Taxpayers have been allowed deductions for casualty losses for about 150 years. In 1867, tax deductions were allowed for losses related to fire and shipwrecks. In 1870, the same year the Harpers Ferry Flood devastated parts of the Shenandoah, the definition was expanded to include floods. A few years later, the wording was changed to “storms.”

By the early 20th century, the deduction had changed again. In 1913, the first tax form under the new, modern tax system that we have today, allowed a general deduction for “Losses actually sustained during the year incurred in trade or arising from fires, storms, or shipwreck, and not compensated for by insurance or otherwise.”

Three years later, the definition expanded to include “Losses actually sustained during the year, incurred in his business or trade, or arising from fires, storms, shipwreck, or other casualty, and from theft, when such losses are not compensated for by insurance or otherwise.”

Today’s Casualty Losses

Today, the IRS defines a casualty loss as “the damage, destruction or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption.” Losses have been expanded to include damages suffered from financial crimes and theft.

The IRS’ definition of a casualty loss isn’t found in the statute or the regulations, but rather from case law and a Revenue Ruling (more on that later). That definition remains on the books. But, from 2018 to 2025, due to the TCJA, personal casualty and theft losses are deductible only to the extent that the losses are attributable to a federally declared disaster. Recently, there were other tweaks: the Taxpayer Certainty and Disaster Tax Relief Acts of 2019 and 2020 expanded the rules for personal casualty losses attributable to certain major federal disasters declared in 2018, 2019, and 2020. Those included, among other disasters, Hurricane Harvey, Hurricane Irma, Hurricane Maria, and the California wildfires in 2017 and January 2018.

There is an exception to these rules. If you have personal casualty gains for the tax year, you can reduce those by any casualty losses not attributable to a federally declared disaster. Any excess gain can reduce losses from a federally declared disaster. A “personal casualty gain” means a “recognized gain from any involuntary conversion of property…arising from fire, storm, shipwreck, or other casualty, or from theft.” Let’s say, for example, that your home is struck by lightning, and you receive replacement insurance proceeds that exceed your basis in the property—that’s a personal casualty gain.

Of course, you can’t deduct losses covered or reimbursed by insurance. You must also include any adjustments to your property’s basis in your calculation, and you can’t claim a loss greater than the property’s value.

If your loss deduction is more than your income, you may have a net operating loss. Unlike many other deductions, you do not have to be in a trade or business to have a net operating loss from a casualty.

You usually claim a casualty loss in the year the disaster occurs. However, if the loss is in a federally declared disaster area, you may choose to treat the loss as having occurred in the year immediately preceding the tax year in which the disaster happened—simply file an amended return.

The revised rules mean that homeowners who suffer damage—even from severe storms—to their property aren’t entitled to a deduction for a few more years (we’ll see whether Congress moves to restore it). That includes homeowners like Hall.

What If?

But what if the rules disallowing personal casualty losses not related to federal disasters weren’t in place? What if the pre-2018 rules still applied? Could Hall deduct the cost to (shudder) dig the snake den out of her home? Would her snake infestation count as the “damage, destruction, or loss of your property from any sudden, unexpected, or unusual event”?

Probably not. The IRS takes the position that a casualty loss does not include normal wear and tear or damage that happens over time, like termite damage.

Remember that Revenue Ruling I mentioned earlier? It’s Rev. Rul. 74-179. And notably, it reinforces the concept that the term casualty “refers to an identifiable event of a sudden, unexpected, or unusual nature.” The qualifier “sudden” is key here. While we’d all agree, I’m sure, that a snake infestation is unexpected and unusual (see also disturbing and horrifying), I’m not so sure that it would qualify as sudden—especially considering the pest inspectors’ belief that the den had been there for two years. Dozens of snakes didn’t simply infest the home one day. Their arrival—and subsequent damage to the home—likely happened over time. The IRS would probably argue, as they do for other long-term damage caused by pests, including termites and moths, that any damage or loss resulting from a progressive deterioration would not qualify as a casualty loss.

Other Options

And if, after reading this, you’re still thinking the best option is that home should be set on fire, you should be aware that the IRS has thought of that, too. Even if the casualty deduction was still in play for 2023 for losses not caused by a federally declared disaster, in Pub 547, the IRS makes clear that you can’t deduct a casualty loss if the damage or destruction is caused by a fire if you willfully set it or pay someone else to set it.

As for moving out of the home? That would also be on my list. Unfortunately, for the tax years 2018 through 2025, you can no longer deduct moving expenses unless you are a member of the Armed Forces on active duty and, due to a military order, you move because of a permanent change of station. Fleeing a house full of snakes doesn’t count—even if it totally should.