26 U.S.C. § 165 — Losses

> Official source: https://uscode.house.gov/quicksearch/get.plx?title=26&section=165 — Internal Revenue Code text as published by the U.S. House Office of the Law Revision Counsel, USLM bulk release point 119-102, retrieved 2026-09-09. Cite as: IRC § 165. **Statutory text only** — editorial notes, amendment history and effective-date notes are omitted; confirm currency for amendments after the release point.

(b) Amount of deduction There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise.

(b) Amount of deduction

For purposes of subsection (a), the basis for determining the amount of the deduction for any loss shall be the adjusted basis provided in section 1011 for determining the loss from the sale or other disposition of property.

(c) Limitation on losses of individuals › (2) In the case of an individual, the deduction under subsection (a) shall be limited to—

(1)

losses incurred in a trade or business;

(2)

losses incurred in any transaction entered into for profit, though not connected with a trade or business; and

(c) Limitation on losses of individuals › (3) except as provided in subsection (h), losses of property not connected with a trade or business or a transaction entered into for profit, if such losses arise from fire, storm, shipwreck, or other casualty, or from theft.

(d) Wagering losses › (1) In general For purposes of losses from wagering transactions, the amount allowed as a deduction for any taxable year— (A) shall be equal to 90 percent of the amount of such losses during such taxable year, and (B) shall be allowed only to the extent of the gains from such transactions during such taxable year.

(e) Theft losses For purposes of paragraph (1), the term “losses from wagering transactions” includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction.

(e) Theft losses

For purposes of subsection (a), any loss arising from theft shall be treated as sustained during the taxable year in which the taxpayer discovers such loss.