Per IRS Publication 547 Casualties, Disasters, and Thefts, page 9:

Reimbursement Received After Deducting Loss

If you figured your casualty or theft loss using the amount of your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. This section explains the adjustment you may have to make.

Actual reimbursement less than expected. If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement.

    Example. Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2022. The accident was due to the negligence of the other driver. At the end of 2022 there was a reasonable prospect that the owner of the other car would reimburse you in full. You didn’t have a deductible loss in 2022.

In January 2023, the court awards you a judgment of $2,000. However, in July it becomes apparent that you will be unable to collect any amount from the other driver. You can deduct the loss in 2022 (to the extent it doesn’t exceed your 2022 personal casualty gains) that is figured by applying the deduction limits (discussed later).

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.