The IRS does allow for a casualty loss that exceeds your income be handled the same as a Net Operating Loss that a business can experience.
The NOL for a qualified disaster can be carried back 5 years, or a waiver can be made to only carryforward the loss to be used in a 20 year period.
To waive the carryback you need to attach a statement with your return that shows that you are choosing to waive the carryback period under section 172(b)(3). If you have filed your return you can still make this choice by amending your return within the due date of the return and write, "Filed pursuant to section 301.9100-2" at the top of the statement.
If you carryforward you will do so with next year's return.
Click here
for IRS Pub 536 covering NOLs
