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Tax Law Provisions for Disaster Areas

Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location to be a major disaster area. Generally speaking, a disaster loss is a loss that occurred in a federally declared disaster area because of or related to a federally declared disaster. Although a disaster loss is a type of casualty loss, special rules apply that generally provide more favorable tax treatment for disaster losses. Depending on the circumstances, the IRS may grant additional time to file returns and pay taxes.

The Around the Nation page provides IRS news specific to local areas, primarily disaster relief or tax provisions that affect certain states. You can also review the list of recent tax relief provided by the IRS in disaster situations based on the Federal Emergency Management Agency's declarations.

Special Instructions for Individuals Claiming Disaster Losses Attributable to Hurricanes Harvey, Irma or Maria

The Disaster Tax Relief and Airport and Airway Extension Act of 2017 (the 2017 Act) provides additional relief to many, but not all, victims of Hurricanes Harvey, Irma or Maria. Under the 2017 Act victims may deduct greater portions of hurricane disaster losses that occurred in Florida, Georgia, Texas, Puerto Rico or the U.S. Virgin Islands because part of the usual casualty loss limit does not apply.

As an alternative to claiming hurricane disaster losses by reporting them on their 2017 federal tax return, many victims can choose to claim hurricane disaster losses sooner by reporting them on their 2016 federal tax return (or by amending their 2016 tax return if it was already filed in 2017) if the loss occurred anywhere in Florida, Georgia, Puerto Rico, South Carolina, or the Islands of St. Croix, St. John and St. Thomas in the U.S. Virgin Islands, or in certain areas of Louisiana or Texas.

These special rules apply only to individuals with a U.S. income tax filing requirement with the IRS. Bona fide residents of the U.S. Virgin Islands may wish to seek guidance from the USVI Bureau of Internal Revenue regarding the extent to which any such relief may be applicable when filing their USVI income tax return.

2017 Act Casualty and Theft Loss Calculation and Instructions

The casualty and theft loss deduction helps taxpayers who have unreimbursed losses. Ordinarily, taxpayers figure their deduction by starting with the amount their insurance doesn’t cover. Taxpayers must reduce each personal casualty or theft loss by $100 and then reduce their total personal casualty and theft losses by 10 percent of their adjusted gross income. Then, they may only deduct the part of the loss that exceeds these limits. However, if a taxpayer sustained losses due to Hurricanes Harvey, Irma or Maria, the 2017 Act provides a different calculation for many victims that allows a deduction for the entire portion of the disaster loss not covered by insurance that exceeds $500.

Under the 2017 Act, losses qualifying for this relief include personal losses from flooding or other casualty, and losses from theft, that arose in the federally declared hurricane disaster areas announced before September 21, 2017, and that were caused by the hurricane. If your loss arose in Florida, Georgia, Texas, Puerto Rico or the U.S. Virgin Islands, your loss is subject to the $500 reduction and is not reduced based on your adjusted gross income. You must use $500 as the reduction when determining your qualified net hurricane disaster loss and indicate “hurricane tax relief” at the top of your tax return as outlined in the Form 4684 instructions.

Casualty and theft losses are generally deducted on Schedule A, Itemized Deductions, but, you may choose instead to increase your standard deduction by your qualified net hurricane disaster loss if you don’t itemize other deductions on Schedule A. See the instructions for more detail. 

Note: This special calculation cannot be used to figure disaster losses in Louisiana and South Carolina. These losses must be deducted using the usual casualty and theft loss limits.

Claiming Losses on Your 2016 or 2017 Federal Tax Return

Your unreimbursed casualty and theft losses are generally deductible in the year the casualty occurred or the year in which the theft was discovered. However, you may elect to deduct a loss arising from a federally declared disaster that occurred in 2017 on your 2016 or 2017 federal tax return if your loss occurred in a disaster area determined to warrant federal assistance. You may wish to seek tax advice from a tax professional to determine whether to claim your hurricane-related disaster loss in tax year 2016 or 2017.

Not all who can apply the 2017 Act special hurricane disaster loss calculation have te option to claim their casualty and theft losses on their 2016 tax return. The rules depend on where the loss occurred.

Florida: You can elect to report all Hurricane Irma losses in Florida on your 2016 or 2017 federal tax return. Use the special hurricane disaster loss calculation on Form 4684, Casualties and Thefts, for tax year 2016 or 2017 when reporting Hurricane Irma losses arising in Florida after September 3, 2017.

Georgia: You can elect to report all Hurricane Irma losses in Georgia on your 2016 or 2017 federal tax return. Use the special hurricane disaster loss calculation on Form 4684 for tax year 2016 or 2017 when reporting Hurricane Irma losses arising in Georgia after September 3, 2017.

Louisiana: You can elect to report Tropical Storm Harvey losses in Louisiana on your 2016 or 2017 federal tax return only if the loss occurred in one of these Louisiana parishes. Losses in other areas can be reported only on your 2017 federal tax return. Don’t use the special hurricane disaster loss calculation on Form 4684 for tax year 2016 or 2017.  Indicate “Louisiana, Tropical Storm Harvey” at the top of your tax return.

Puerto Rico: You can elect to report all Hurricane Maria losses in Puerto Rico on your 2016 or 2017 federal tax return. You can elect to report Hurricane Irma losses in Puerto Rico on your 2016 or 2017 federal tax return only if the loss occurred in one of these Puerto Rico municipalities. Hurricane Irma losses in other areas can be reported only on your 2017 federal tax return. Use the special hurricane disaster loss calculation on Form 4684 for tax year 2016 or 2017 when reporting Hurricane Irma losses arising anywhere in Puerto Rico after September 3, 2017, and Hurricane Maria losses arising anywhere in Puerto Rico after September 15, 2017.

South Carolina: You can elect to report all Hurricane Irma losses in South Carolina on your 2016 or 2017 federal tax return. However, don’t use the special hurricane disaster loss calculation on Form 4684 for tax year 2016 or 2017. Indicate “South Carolina, Hurricane Irma” at the top of your tax return.

Texas: You can elect to report Hurricane Harvey losses in Texas on your 2016 or 2017 federal tax return only if the loss occurred in one of these Texas counties. Losses in other areas can be reported only on your 2017 federal tax return. Use the special hurricane disaster loss calculation on Form 4684 for tax year 2016 or 2017 when reporting Hurricane Harvey losses arising anywhere in Texas after August 22, 2017.

U.S. Virgin Islands: You can elect to report Hurricane Irma or Hurricane Maria losses on your 2016 or 2017 federal tax return only if the loss occurred on the islands of St. Croix, St. John, and St. Thomas. Losses on other islands can be reported only on your 2017 federal tax return. Use the special hurricane disaster loss calculation on Form 4684 for tax year 2016 or 2017 when reporting Hurricane Irma losses arising anywhere in the U.S. Virgin Islands after September 3, 2017, and Hurricane Maria losses arising anywhere in the U.S. Virgin Islands after September 15, 2017.

If you decide to deduct disaster losses from Hurricanes Harvey, Irma or Maria from any of these areas on your 2016 tax return, use the following additional instructions to complete your forms.

Amending your tax year 2016 return

If you have already filed your 2016 federal tax return and want to elect to deduct your qualified net hurricane disaster loss for 2016, you will need to file Form 1040X, Amended U.S. Individual Income Tax Return, on paper, to amend your 2016 federal tax return. Amended tax returns can take up to 16 weeks to process. To make the election to deduct the loss on your 2016 return, you must file the amended return on or before October 15, 2018.

Filing your original tax year 2016 return

If you requested an extension of time to file your 2016 federal income tax return until October 16, 2017, you have until January 31, 2018, to timely file your Form 1040, U.S. Individual Income Tax Return, or Form 1040NR, U.S. Nonresident Alien Income Tax Return. You cannot file electronically to claim your disaster loss for tax year 2016 and you must timely file your paper 2016 tax return by mail. Paper Form 1040 processing can take up to six weeks.

These 2016 Instructions for Form 4684 (PDF) can help you claim your disaster losses on your 2016 return by filing Form 1040, Form 1040X or Form 1040NR, revised Form 4684, Casualties and Thefts, and Schedule A, Itemized Deductions.

Claiming Losses on Your Tax Year 2017 Federal Tax Return

You’ll be able to file your tax return electronically if you are claiming the loss when you file your tax year 2017 federal tax return in 2018.

For more information on casualty, disaster and theft losses, see: