Calculating a Loss
To determine the deduction for a casualty or theft loss, first calculate the loss.
Amount of loss. Use the following steps to calculate the loss.
1) Determine the adjusted basis in the property before the loss.
2) Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft.
3) From the smaller of the amounts determined in (1) and (2), subtract any insurance or other reimbursement received or expected to be received.
Business and income producing property. The decrease in FMV is not considered in calculating the loss for property that is stolen or completely destroyed.
Full article: Itemized Deductions - Casualty and Theft Losses 2021