For LA 1/25 fires, to include both property AND loss of use relief from insurance, FEMA and charities? OK to claim on 2024 returns?

Forum|Forum|1 year ago
July 29, 2025
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Mike9241

Level 15

yes casualty losses in federally declared disaster areas can be deducted the year of occurrence or the prior year.

see this IRS website - casualty losses section for further guidance

https://www.irs.gov/newsroom/irs-announces-tax-relief-for-taxpayers-impacted-by-wildfires-in-california-various-deadlines-postponed-to-oct-15

Mike9241

Opus 17

Level 15

Any income is reported when paid. Wildfire relief payments were designated as tax-free, but still need to be reported, they will be reported on your 2025 return. Payments from charity would usually not be taxable (although there might be exceptions)--they would be taxable when actually paid.

The loss can be deducted on your 2024 or 2025 return. However, at this time, it's not obvious which would get you paid faster. If you never filed your 2024 return (are late or have an extension) then your loss will be handled faster filing on the 2024 return. But if you already filed your original return, I don't know if an amended 2024 return would be paid faster than an original 2025 return (because of how long amended returns take to process).

You also have to account for any reimbursement in your loss calculation, so if that is not final, you should probably wait to claim the loss, because if you claim a loss now (on an amended or original 2024 return) and then your loss ends up being different because of adjustments, that gets complicated to correct.

wkassinAuthor

Level 3

Thank you, yes I haven't filed yet since 2024 had an auto extension until 10-15.

All reimbursements are in, so that is more simple too.

Are Loss of Use reimbursements required to be included or just Property related? How about from the Red Cross?

Last question, this amount just gets added to the standard deduction if I don't itemize, and is subject to $100 floor and limited by 2% AGI?

Opus 17

Level 15

@wkassin wrote:

Thank you, yes I haven't filed yet since 2024 had an auto extension until 10-15.

All reimbursements are in, so that is more simple too.

Are Loss of Use reimbursements required to be included or just Property related? How about from the Red Cross?

Last question, this amount just gets added to the standard deduction if I don't itemize, and is subject to $100 floor and limited by 2% AGI?

The IRS deductible for a qualified disaster loss is $500, but there is no AGI limit. It is added to the standard deduction if you don't otherwise itemize.

[Edited to add] See below. There is a difference between a disaster loss and a qualified disaster loss. This is not a qualified disaster loss. So under the rules, the loss has a $100 deductible and 10% AGI limitation, and is not added to the standard deduction. You can use your standard deduction (without the loss) or the total of your itemized deductions (including the loss), whichever is larger.

I can't make a blanket statement about every possible kind of "loss of use" payment, but the IRS says this:

https://www.irs.gov/forms-pubs/about-publication-547

Inclusion in income.

If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Report this amount on Schedule 1 (Form 1040), line 8z. However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. See Qualified disaster relief payments, later, under Disaster Area Losses.

Qualified disaster relief payments

Qualified disaster relief payments aren’t included in the income of individuals to the extent any expenses compensated by these payments aren’t otherwise compensated for by insurance or other reimbursement. These payments aren’t subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). No withholding applies to these payments.

Qualified disaster relief payments include payments you receive (regardless of the source) for the following expenses.

Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a federally declared disaster.
Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a federally declared disaster. (A personal residence can be a rented residence or one you own.)
Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a federally declared disaster.

Qualified disaster relief payments also include amounts paid to individuals affected by the disaster by a federal, state, or local government in connection with a federally declared disaster. These payments must be made from a governmental fund, be based on individual or family needs, and not be compensation for services. Payments to businesses generally don’t qualify.