For federal income tax purposes, the tax law provides a tax deduction for casualties. The casualty loss deduction, however, applies to damage and destruction of property that is caused by a sudden, unexpected or unusual event. The event must be swift, not gradual, and unexpected; i.e., not typical. Hurricanes and fires are casualty, but insect damage seldom qualifies, because the damages tend to be gradual over time. Casualty loss is reported on Form 4684.
The appraisal fees are deductible on Schedule A as a miscellaneous expense. Miscellaneous expenses are subject to a two percent adjusted gross income reduction.