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I live in a federally declared disaster area, what does that mean for my taxes?

SOLVEDby TurboTax771Updated January 19, 2022

Here are answers to some of the most common questions taxpayers have about federal disasters.

You can deduct your total loss (minus $500 and any amount covered by insurance) along with your usual Standard Deduction, whether you amend 2020 (see below) or file as usual for tax year 2021. This means you’ll be able to claim everything you lost over $500 without having to itemize deductions on your taxes.

If you live in a designated disaster area, the IRS lets you apply an itemized loss to the previous tax year (even if you didn’t originally itemize). They'll also expedite processing. In other words, if you were hit by a disaster in 2021, you can amend your 2020 taxes to note the loss, and the IRS will try to have your money to you within 60 days of receiving your paperwork.

The deadline to submit a disaster-related amended return for 2020 taxes is October 15, 2022. (You have up to three years to submit a regular amended return, but the IRS can take up to 12 weeks to process it.)

To take advantage of this, you'll need to go through the steps to qualify for the deduction for disasters, theft, and other property loss or damage. However, the usual limits won't apply to you because you were affected by a federally declared natural disaster. You'll be able to deduct your total loss, minus $500 and any amount covered by insurance.

In TurboTax, enter your Description in the following format: State, Disaster. For example, California, Wildfires. See our full instructions for entering property loss or damage in TurboTax.

You may also want to compare whether you'd get more back by amending 2020 or taking the loss in 2021.

You may be eligible for relief from some of your state tax obligations. Some states even provide relief to their residents if they have business or other interests in another state. For the most up-to-date info, check the FEMA website.

Contact the IRS and your state agencies as soon as possible. Here's more info.

The IRS has an extensive list of suggestions for how to establish what you lost.

Here are some things to consider:

  • Loans are not taxable if you repay them in full within the given time period
  • While hardship distributions generally are taxable, if you live in a federally declared disaster area, the 10% early withdrawal penalty for accounts up to $100,000 is waived

Due to the specifics of each plan, the above is only an overview. For full details, contact your plan administrator.

See our help article on what to do if you were affected by a natural disaster.

  • IRS: Tax relief in disaster situations—Find information on the most recent tax relief provisions for taxpayers affected by disaster situations
  • DisasterAssistance.gov—This is the federal government's all-inclusive site for disaster relief ranging from tax information to other assistance, such as food and housing aid

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