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Tax Law Provisions for Disaster Areas

Congress enacted special tax relief to help taxpayers and businesses recover from the impact of 2016 qualified disasters, and the following 2017 qualified disasters: Hurricane Harvey and Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, and the California wildfires. This special relief is in the Disaster Relief and Airport and Airway Extension Act of 2017, the Tax Cuts and Jobs Act of 2017, and the Bipartisan Budget Act of 2018.

The Around the Nation page provides IRS news specific to local areas. The page primarily features disaster relief or tax provisions that affect certain states. Taxpayers 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 Qualified Disaster Losses

Generally, a disaster loss is a loss that occurred in a federally declared disaster area that is attributable 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 “qualified” disaster losses. 

Taxpayers can claim a qualified disaster loss for personal casualty losses resulting from federally declared disasters that occurred in 2016, as well as certain 2017 disasters mentioned below.

A 2016 qualified disaster is a major disaster declared by the President of the United States under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act in calendar year 2016. A 2016 qualified disaster area is an area for which such a major disaster was declared.

A 2017 qualified disaster includes the following federally declared disasters: Hurricane Harvey and Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, and the California wildfires. These disasters were declared by the President of the United States under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act in calendar year 2017. Not all 2017 federally declared disasters are considered 2017 qualified disasters. Only Hurricane Harvey and Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, and the California wildfires are considered 2017 qualified disasters for special disaster tax relief purposes.

See Publication 976, Disaster Relief, for information about:

  • Qualified 2016 disasters declared by the President in 2016
  • Hurricane Harvey or Tropical Storm Harvey disaster areas, covered disaster areas and disaster zones
  • Hurricane Irma disaster area, covered disaster area and disaster zone
  • Hurricane Maria disaster area, covered disaster area and disaster zone
  • California wildfire disaster area, covered disaster area and disaster zone
  • Victims of California wildfires, flooding, mudflows and debris flows

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

Affected taxpayers can also identify themselves to the IRS or ask disaster-related questions by calling the special IRS disaster hotline at 1-866-562-5227.

Claiming Qualified Disaster Losses

Qualified disaster losses are claimed on Form 4684, Casualties and Thefts.

The $100 limitation per casualty increases to $500 for net qualified disaster losses. You must use $500 as the reduction when determining your qualified disaster loss.

The 10 percent of adjusted gross income limit doesn’t apply to net qualified disaster losses. You are allowed a deduction for the entire portion of the disaster loss, not covered by insurance or other reimbursement claims, that exceeds $500.

You can increase your standard deduction by the amount of your net qualified disaster loss instead of itemizing deductions on Schedule A. You can deduct 2016 and 2017 qualified disaster losses for both regular and AMT purposes without itemizing other deductions on Schedule A. See the Schedule A instructions for more detail.

See Publication 976 for information about safe harbor methods you may use to calculate the amount of your casualty losses for your personal-use residential real property damaged or destroyed.

Claiming Losses on Your Federal Tax Return for Any Federally Declared Disaster

Your unreimbursed casualty and theft losses are generally claimed in the year the casualty occurred or the year in which the theft was discovered. However, if you have a casualty loss attributable to a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can deduct the loss in the tax year before the loss occurred.

Thus, you may apply this rule to claim qualified disaster losses that occurred in 2017 on your 2016 return.  See the instructions for Form 4684 for information on how to deduct disaster losses in the prior year. You may wish to seek advice from a tax professional to determine the tax year to claim your disaster loss.

You can file your tax return electronically if you are claiming the loss on your tax year 2017 federal tax return that is generally due April 17, 2018. See the 2017 Form 4684 and Instructions for more information.

If you already filed your 2016 tax return, you can amend it to claim your qualified disaster loss by filing a Form 1040X. You must indicate “Federally Declared Disaster” at the top of your tax return as outlined in the 2016 Form 4684 instructions. See the 2016 Instructions for Form 4684 for more information.

Amended tax returns can take up to 16 weeks to process. To deduct the loss on your 2016 return, you must file the amended return on or before October 15, 2018. The revised 2016 Instructions for Form 4684 includes information regarding the election to claim a qualified disaster loss sustained in 2016 on an amended 2015 tax return. 

If you have not filed your 2016 tax return and you want to deduct or increase your standard deduction by your net qualified disaster loss on your 2016 tax return, you must file on paper and may not file electronically. Use either Form 1040 or Form 1040NR. To figure your net qualified disaster loss, see the Instructions for Form 4684. You must indicate “Federally Declared Disaster” at the top of your tax return as outlined in the 2016 Form 4684 instructions. Paper Form 1040 processing can take up to six weeks.

See Publication 976 for more information about special tax law provisions to help taxpayers and businesses recover from the impact of 2016 and 2017 qualified disasters. This publication includes information about additional tax relief for individuals who may be able to use 2016 earned income to figure the earned income credit and additional child tax credit.

Other topics addressed are:

  • Charitable giving incentives
  • IRAs and other retirement plans
  • Taxation of qualified 2016 disaster distributions and qualified 2017 disaster distributions
  • Repayment of qualified disaster distributions and loans from qualified plans
  • Employee retention credit.

Additional Resources