No Casualty Loss Deduction Because of Increased Freeway Traffic

Question: We purchased our home in Buckeye ten years ago. Our home is in a nice neighborhood, but is next to the I-10 freeway. The recent expansion of the I-10 freeway has increased noise and pollution in our neighborhood, and the value of our home has decreased at least $100,000. If we get an appraisal substantiating this $100,000 decrease in value, can we take a $100,000 casualty loss deduction on our 1040 income tax return?

Answer: No. Even if the increased noise and pollution is a “sudden, unexpected, and unusual” event which is required for a casualty loss deduction, there has probably been no “physical damage” to your home which is also required for a casualty loss deduction.

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