Tax Breaks for Victims of Hurricanes, Wildfires and Other Disasters
As natural disasters, such as hurricanes, wildfires, earthquakes, tornadoes, floods and blizzards, become more intense, losses from these disasters are soaring. If you suffer property damage from such a disaster, knowledge of the tax law can help.
Deducting Losses
Individuals can deduct personal casualty losses that are not reimbursed by insurance to the extent those uninsured losses are attributable to federally declared disasters that affect a wide area.
Your loss is equal to the smaller of the damaged property’s adjusted basis or decline in value, less any insurance proceeds you receive or expect to receive.
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New legislation passed by Congress has tax easings identical to prior relief for victims of federally declared disasters that occurred in 2020 through July 4, 2025. The law, named the “Doug LaMalfa Federal Disaster Tax Relief Certainty Act,” applies to federally declared disasters beginning before 2026, which includes disasters that occurred in the last six months of 2025.
The new legislation lets taxpayers deduct their uninsured personal losses, such as damage to a house, car, or personal belongings, from federally declared disasters in excess of a $500 threshold, without regard to the 10%-of-adjusted-gross-income offset that generally applies to disaster loss deductions.
This expanded tax break is available for taxpayers who claim the standard deduction and for those who itemize on Schedule A of Form 1040. The IRS refers to these losses as “qualified disaster losses.”
Computing the amount of loss to your home, car, or belongings can be difficult. Luckily, the IRS has multiple safe harbors that may help with this calculation.
- For example, one method lets a homeowner with casualty losses of $20,000 or less take the lesser of two repair estimates to determine the decrease in the home’s value.
- Homeowners can also use the estimated loss in reports prepared by an insurer or a licensed contractor’s invoice.
- And there is a safe harbor to help you compute the replacement cost of your personal belongings destroyed in the federally declared disaster.
You can find out more about these safe harbors in IRS Publication 547 and IRS Revenue Procedure 2018-08.
If you suffered a disaster loss last year after July 4, 2025, and you used the old tax rules when preparing your 2025 tax return, you have three years from the filing due date to amend your return by filing Form 1040X to take advantage of the new law.
If you suffer a disaster loss in 2026, you can claim the loss on your 2026 or 2025 federal tax return. That’s because individuals can opt to take the loss for the disaster year or the year immediately preceding the disaster.
For example, if a tornado damaged your home or personal belongings this year, you can claim the loss on your 2026 return or your 2025 return, giving you the flexibility to claim it in the year that provides the greatest benefit. If you decide to claim it for 2025 and you have already filed your 2025 return, you can amend it by filing Form 1040-X.
Note that for this purpose, the filing due date for a 2025 amended return is six months after the normal due date for filing your return (without extensions) for the year in which the loss took place. So for 2026 disaster losses, you would need to file an amended 2025 return by October 15, 2027.
IRS Resources
The IRS can be your friend after a disaster. If you lost prior-year tax returns in a hurricane, fire or other disaster, there are multiple ways to get a tax transcript, which is a summary of your key tax information. You can get a paper copy of your full return, but that would take longer.
The IRS also has a dedicated phone line for disaster-related questions: 866-562-5227. This is in addition to the tax filing and tax payment extensions that the IRS regularly provides after a disaster.
Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.
