If your home is destroyed in a wildfire, hurricane, tornado or other weather event, it may cost hundreds of thousands of dollars to rebuild or fix the damages. Even if your insurance pays out, it may still fall short of covering all your losses.
But you may be able to get some money back by deducting disaster losses on your taxes, and new rules expand the tax break to more people.
Here’s what you need to know to about gathering records for a disaster loss deduction and how to take advantage of extended tax-filing deadlines.
First, Act Immediately
Taxes may be the last thing on your mind when dealing with the devastation of a fire, hurricane or tornado, but it helps to start gathering evidence now to build your case.
You may also need to reconstruct other tax records that were destroyed in the disaster to avoid tax surprises in the future (more on that below).
The longer you wait, the harder it can be to track down the information.
“We went through Hurricane Michael in 2018 in Panama City, where I live. We basically had to calculate casualty losses on every single tax return,” says Mindy Rankin, a certified public accountant and member of the tax division Warren Averett, an accounting and advisory firm.
Her recommendation for people affected by the recent storms: “Go ahead and start reconstructing your tax basis now.”
When Is Disaster Damage Tax Deductible?
The rules for deducting disaster losses on personal income taxes changed after the 2017 Tax Cuts and Jobs Act. From 2018 to 2025, individuals can deduct losses only for federally declared disasters.
If your house is damaged or destroyed in a storm or fire that doesn’t receive a federal designation, you can’t take the deduction.
The IRS generally considers your loss to be lesser of the cost basis of the property (which is usually what you paid for the house plus the cost of home improvements) or the drop in fair market value of your property because of the disaster.
“You take the smaller of those two numbers, and you subtract any insurance or other reimbursements, and that is the amount of the casualty loss,” says Elizabeth Brennan, a CPA in New Orleans and vice chair of the American Institute of CPAs’ disaster tax relief task force.
You can’t double-dip, however, so you’ll need to let the IRS know if you receive any insurance payouts for your losses after you file your return.
More people can qualify for the deduction, thanks to a new law. Until recently, you had to subtract $100 from the disaster loss and reduce it by 10% of your adjusted gross income to figure the amount you could deduct. You could only claim personal disaster losses if you itemized your deductions, not if you took the standard deduction.
But the Federal Disaster Tax Relief Act of 2023, which was enacted on Dec. 12, 2024, changed the rules for federally declared disasters occurring from Jan. 1, 2020, to Feb. 10, 2025. The $100 subtraction increased to $500, the loss isn’t subject to the 10% adjusted gross income limitation, and you can claim the loss deduction in addition to the standard deduction rather than having to itemize.
If you claimed the loss under the old rules — or if you didn’t claim a disaster loss because you didn’t itemize — you can file an amended return and get a refund. “There may be a great deal of amended returns that will need to be filed,” says Daniel Hauffe, senior manager for tax policy and advocacy for the AICPA.
[Read: The Pros and Cons of Standard vs. Itemized Tax Deductions]
How to Reconstruct Tax Records for Disaster Losses
Even if you don’t know yet whether you’ll qualify for a disaster loss deduction, it helps to start tracking down records now. “It is essential for tax purposes, and for getting federal assistance and insurance reimbursement, that you have good records,” Brennan says.
Since the deduction is based on the lesser of your cost basis or the loss of value, you’ll need records of the purchase price plus the cost of home improvements for the basis. You can use before-and-after photos or appraisals to help establish the loss in fair market value, so take pictures of the damage as soon as it’s safe to do so.
“Take photos and videos of your property periodically to document pre-disaster conditions, and take photos immediately after to document the damage,” Brennan says. “I advise my clients to walk around the house and take photos of everything at the beginning of every hurricane season.”
[READ: Beating the IRS: How to Dodge the Surge Penalty]
She also had a client who used Google Earth photos to establish the pre-damaged status of the home.
If your records were destroyed in the storm, you may need to do some detective work. You can ask your contractor for records of home improvements, and you may even be able to track down some information from your local permit office.
“You could contact your local permit office and see how many permits you pulled over the years, and that would help if you had a new roof or substantial improvements to the property,” Rankin says.
See the IRS’s reconstructing records after a natural disaster or casualty loss factsheet and IRS Publication 584, Casualty, Disaster, and Theft Loss Workbook.
You may also need to reconstruct records that were destroyed as evidence for other tax breaks.
“People lost their houses and they don’t have any of their tax history or tax returns,” says Jason Poole, CPA and partner at TRP Sumner PLLC in Fayetteville, North Carolina.
If you work with a CPA, they typically keep digital tax records and can provide you with copies of many of the documents. “Our firm keeps records for 10 years, and we’re able to provide documents back to our clients for the last 10 years,” Poole says.
You can get some information from the IRS, too.
“The IRS now has a MyAccount tool available that taxpayers can sign up for and quickly and easily pull a transcript that gives them good historical tax data,” Brennan says. “The taxpayer can also submit a form for the physical copy of a prior-year tax return.”
You may need to track down records of tax-deductible expenses you’ve been accumulating for the current year that were in your house and destroyed by the storm.
“If you’re missing receipts, you can reach out to your credit card company and can get a statement to help reconstruct those costs,” Brennan says.
Even if your bank shows only records from the past year online, you can contact customer service to request additional records. Banks are usually required to keep deposit images for at least five years and account statements for up to seven years, says Miklos Ringbauer, CPA and principal at Miklos CPA Inc. in the Los Angeles area.
He most recently helped clients track down records after their homes were destroyed in the 2023 California floods.
[Read: How to File a Tax Extension.]
How Disasters Affect Tax Deadlines
As a storm is heading your way, taxes are obviously not your top priority. But hurricane season tends to be in the middle of several tax-filing deadlines.
“For us, the peak of hurricane season is hitting during the second-busiest time of year for any tax preparer,” says Shelly Weir, president and CEO of the Florida Institute of CPAs.
It’s hard to know as a storm is approaching whether the IRS is going to extend the tax-filing deadline for your county. It generally extends the deadlines for at least 60 days after receiving notice of a federally declared disaster, but it can be difficult to know what to do before receiving the official word from the IRS.
Hurricane Michael hit on Oct. 10, 2018, right before the Oct. 15 deadline for filing extended returns.
“The day before the hurricane hit, the two other tax partners and I sent our staff home because they had to evacuate, and we went to the Waffle House and weren’t sure if we should work on the tax returns or go home because we didn’t know whether the relief would be given,” Rankin says.
The IRS eventually extended the deadlines, which made a huge difference as the area struggled to recover.
“We didn’t get internet back on in our office until Thanksgiving weekend,” she says. “There was no electricity or cell service for a long time.”
“Sometimes the IRS has a two- to four-day lag time before when the declaration is issued and when their postponement notice goes out, and it can cause a lot of stress,” says Hauffe of the AICPA.
That happened in 2024 with Hurricane Milton. Most Florida counties already had extended deadlines for Hurricanes Debby and Helene. But the deadlines hadn’t been extended in six of the most populated counties — which included Miami, Ft. Lauderdale and Palm Beach — and the deadline was looming as Hurricane Milton headed their way.
“The storm is hitting on Thursday and the deadline is on Tuesday, and normally it takes them a couple of days to get the extensions out,” Weir says.
She lost power when Milton hit and found a way to contact the IRS that Friday to try to ask about getting the extension approved before the Oct. 15 deadline.
“During the storm, I was making sure my family and staff were safe, and as soon as the last band of hurricane-force winds left our area, and we still didn’t have power, I got on the phone with the IRS,” she says.
The IRS ultimately extended the deadlines in all of Florida until May 1, 2025, including returns and filings that were originally due after the storm. (The start dates vary by county.)
The May 1, 2025, deadline also applies to the entire states of Alabama, Georgia, North Carolina and South Carolina, and parts of Tennessee and Virginia. For more information, see the IRS’s tax relief in disaster situations page, including the link to information for your state.
Also contact your state department of taxation to find out about deadline extensions for your state income taxes. You can find contact information for state tax agencies at IRS.gov.
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What to Know About Taxes After a Disaster originally appeared on usnews.com
Update 01/10/25: This story was published at an earlier date and has been updated with new information.
