You should file the 2024 tax return prior to the deadline of October 15, 2025, so approximately four months and a few days from today.
FEMA payments are Qualified disaster relief payments, and these payments are not subject to income tax, self-employment tax or employment taxes of a self-employed individual, unless the expenses were also covered by insurance or other types of reimbursements. (See Publication 525 page 31.)
So the only time that the Tax Benefit Rule (See Publication 525 page 24), is if there is an insurance reimbursement, which based upon what you wrote is not the case.
If there is an insurance reimbursement then this is the relevant part of the Tax Benefit Rule from above.
You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year.
I am so sorry for your loss, and hope this answer helps @MamaC1 in that the FEMA payment is a Qualified disaster relief payment.
All the best,
Marc T.
TurboTax LiveTax Expert
28 Years of Experience Helping Clients
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