If you've been affected by a recent natural disaster, there may be some helpful tax relief options available to ease the burden a bit—especially if you've had property damage or disruptions to your income.
The IRS offers certain provisions via the Federal Disaster Tax Relief Act (FDTRA) for individuals and businesses located in presidentially declared disaster areas, and some of these options may even apply to past tax returns.
To claim these tax benefits, your loss must be tied to a presidentially declared disaster (referred to as a qualified disaster loss) and fall within a specific date range. The special rules apply to disasters that began on or after December 28, 2019, and ended no later than January 11, 2025. (Important note: this relief doesn’t apply to the 2025 California wildfires. In addition, the president must have made the disaster declaration between January 1, 2020, and February 10, 2025.
If you were affected by a disaster within that timeframe, you may be able to claim a qualified disaster loss. Depending on the timing, you could choose to apply that loss to the previous year’s return (which can be beneficial if it leads to a larger refund). This is done by filing an amended return using Form 1040-X.
It’s worth taking the time to review whether any losses you’ve experienced might qualify—especially since the IRS gives you a window of time to make this decision.
If you were impacted by a wildfire—especially in California—there’s a specific provision in the Federal Disaster Tax Relief Act (FDTRA) that could offer some meaningful tax relief. Under this rule, certain “qualified wildfire relief payments” don’t need to be counted as taxable income.
So what kind of payments are covered?
If you received money (either directly or through someone on your behalf) to compensate for wildfire-related losses, it might qualify—as long as it wasn’t reimbursed by insurance. Covered expenses can include:
To be eligible, the disaster must have been a federally declared forest or range fire that was declared after December 31, 2014, and the payments must have been received between January 1, 2020, and December 31, 2025.
One thing to keep in mind: if a payment is excluded from your income under this rule, you can’t also deduct those expenses or claim a tax credit for them. Also, if you used that money to buy or improve property, you can’t increase the basis of the property by the amount you excluded from income—no double-dipping allowed.
If you’ve received wildfire-related payments and aren’t sure how they should be handled on your tax return, it’s a good idea to connect with your tax advisor to make sure you’re following the rules and getting the most benefit.
If you’ve been impacted by a natural disaster, it’s a good idea to:
We’re here to help walk you through the process. If you're unsure whether you qualify or if amending a return makes sense, reach out to your SVA advisor. We’ll take a look at your situation and help you decide on the best course of action.
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