The IRS is one of many government agencies working to ease the burden on those impacted by natural disasters by providing various forms of tax relief available to those in affected areas. Natural disasters of significant magnitude include earthquakes, hurricanes, floods, and wildfires.
Tax relief for victims of natural disasters
Good news – there are options for your clients that have been affected by a qualified natural disaster. As long as the disaster is recognized by FEMA and the IRS, your client should receive some tax relief for their loss.
How do I know if my client was affected by a qualified disaster?
You will want to look at the FEMA website to see if your client’s loss was caused by a recognized disaster.
FEMA assigns a code to each disaster. If your client was affected by an event coded EM or DR, they might be eligible for relief under these conditions:
- Your client or their spouse lives in the disaster area
- The principal location of your client’s business is in the disaster area
- Your client’s tax records are located in the disaster area
If your client qualifies, the IRS will grant them additional time to file, pay certain taxes, and perform time-sensitive tasks like making retirement contributions. The IRS will also waive the fee for requesting copies of prior-year tax returns.
Important: Certain federal agencies require applicants to submit tax information as part of their application process. To qualify for financial assistance, your clients must have filed all required tax return(s).
To request a copy or transcript of your client’s tax returns, use Form 4506, Request for Copy or Transcript of Tax Form.
What can my clients deduct in the event of a natural disaster?
Your clients can claim this deduction on Schedule A as an itemized deduction or it can be added to the standard deduction amount. Taxpayers do not have to itemize to receive this deduction. Clients who itemize can claim personal casualty and theft loss only to the extent that the claim is attributed to a federal disaster declared by the president and FEMA.
What is a qualified disaster loss?
A qualified disaster loss is a loss of your client’s personal property that can be attributed to a federally declared disaster.
Some of these recent events include:
- Hurricane Helene
- Hurricane Milton
- Alaska flooding
- New Mexico wildfires
What does my client need to provide to deduct a loss for taxes?
To claim a casualty loss on your client’s tax return, use Form 4684 Casualties and Thefts. To support the loss claim, you will need to provide the following information:
- The type of casualty and when it occurred
- Was it a direct result of the casualty in a federal disaster area?
- Was your client the owner of the property?
- Photos, videos, receipts, diagrams, floor plans, county assessor records
This information will also help your client for insurance purposes.
For the most up-to-date information regarding all forms of assistance, please visit the FEMA website and the IRS disaster relief press release.
