Disaster Tax Relief in Disaster Areas

Who qualifies for disaster tax relief?

Individuals, families, and businesses may be eligible for federal assistance if they live, own a business, or work in a federally declared disaster area, incur sufficient property damage or loss, and, depending on the type of assistance, do not have the insurance or other resources to meet their needs.

There are different types of relief for those who live in a federally declared disaster area, but the most helpful is generally the casualty loss deduction. Other tax relief methods include accelerated refunds and postponed deadlines.

If you are unsure if you qualify for disaster tax relief, the IRS has a checklist.

What is Disaster Tax Relief?

Disaster relief from IRS covers more than just when to file your taxes. Yes, there are extensions of time to file based on the severity and continuation of the disaster itself and the extreme hardships caused. However, the president must declare a major disaster for tax benefits to be part of the disaster relief.

The tax benefits can be as simple as: extending the due date for filing individual and business returns, paying taxes, quarterly estimates, even payroll taxes for businesses. The benefits include the ability to claim your disaster loss on your previous year tax return, either an amended return or the original depending on whether you filed already. Taxpayers should include the Disaster Declaration Number from FEMA on the top of their return, however, IRS does look at zip codes when they receive the returns, this process is used to speed up processing and get money in taxpayer’s hands quicker. It is also used to suspend penalties and interest for late filing and/or paying when needed.

There are many moving pieces and benefits for taxpayers who have been in a major disaster such as the CA wildfires, major tornadoes and flooding in AL, and a manor hurricane like Ian. If you have been caught in a disaster, be sure to get help from a tax pro so you can file for any refunds owed you quickly and accurately.

When to claim a deduction for your tax relief

You can claim the casualty loss deduction for the tax year that the loss occurs or for the previous tax year. For instance, losses from a 2022 natural disaster can be claimed on a 2022 or 2021 tax return. The taxpayer can choose the more beneficial year.

For example, there were dozens of major disaster declarations in 2022 – including the  wildfires in California and Colorado as well as Hurricane Ian in Florida and other states, the strongest hurricane on record to make landfall in the states. Impacted taxpayers should include these losses on their 2022 tax returns if they didn't already include them on an amended 2021 return.

One benefit of claiming the deduction on the previous year's return is to get money back sooner rather than later. This money will be distributed in the form of a refund on taxes paid on your prior-year return. That could make a big difference when you're trying to get back on your feet after a natural disaster. 

If you are an affected taxpayer living or working in a federally declared disaster area, it’s important that you understand all of your options and speak with a Tax Pro before you file your taxes. Find an office near you and schedule an appointment today. There might be more financial assistance available to you.

About the Author

Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.

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