First of all, for income tax purposes, only losses to your property are deductible as a casualty loss. You can't deduct the loss of future earnings if your business is damaged in a fire, nor can you deduct the loss of time you spent cleaning up after the fire (although you could deduct the cost of hiring a clean-up crew for your business, but not for a fire in your home). For personal losses, you can't deduct the extra living expenses you may have such as renting a car after your personal automobile was damaged in an accident.
How do you measure the amount of damage to your property? The IRS uses a rather conservative yardstick: you must use either the property's adjusted tax basis immediately before the loss, or the property's decline in fair market value due to the casualty, whichever is lower. IRS Form 4684, Casualties and Thefts requires you to compare these two figures and will only allow you to deduct the lower of them. This means that if your property has increased in value since you purchased it, you're out of luck: you can only deduct the property's cost. However, if your property has decreased in value, your loss is limited to the lower current value.
Your adjusted tax basis for property generally is equal to the costs of acquiring it, plus the cost of any improvements, less any depreciation deductions or previous casualty losses.
If the property was totally destroyed in a casualty, rather than just damaged, the value of the loss depends on what the property was used for. If it was used for personal purposes, the rule stated above still holds. But if it was used in a business or to produce income, you simply use the property's adjusted tax basis after the loss, minus any salvage value - the fair market value does not come into play at all.
If a single casualty or theft involves more than one piece of property, you must calculate the value of the loss separately for each item. There's an exception to this rule if the loss was to your home or other personal-use real estate: in that case, you can treat the entire property as a single item (including all buildings, improvements, trees and landscaping). But generally, each item will be listed in a separate column on the appropriate section of your IRS Form 4684.