The Governor of California, Jerry Brown, has declared a state of emergency in response to the deadly wildfires that have burned tens of thousands of acres and forced widespread evacuations. When a state of emergency has been declared taxpayers may deduct a disaster loss for any loss sustained.
In addition, the Internal Revenue Service (IRS) has extended deadlines to file and pay taxes until January 31, 2018 for those who were directly hit by the blazes, as well as firefighters and relief workers who are helping in the affected areas. The relief also applies to the filing of 2016 individual income tax returns that were extended to Oct. 16, 2017 and the January 16, 2018 deadline for quarterly estimated tax payments.
Those who have been affected by the wildfires should take advantage of the tax relief opportunities that are available to them.
Types of Losses That Can Be Deducted
1. Casualty loss
If insurance does not repay for the damage to property due to an earthquake, fire, flood, or similar event that is sudden, unexpected, or unusual, taxpayers will usually qualify for casualty loss deduction.
2. Disaster loss
In California, casualty loss becomes disaster loss when the President of the United States or the Governor of California declares a state of emergency in an area you sustained the loss and you have sustained loss because of the declared disaster.
The IRS relief includes the following counties: Solano, Butte, Lake, Mendocino, Nevada, Orange, Napa, Sonoma, Yuba, Madera, Mariposa, Tulare, Los Angeles and Trinity. Please see the following chart for details:
You can claim a state tax deduction for your disaster loss in the taxable year the disaster occurred or in the taxable year immediately before the disaster occurred. More information can be found at ftb.ca.gov/file/business/deductions/disaster-loss.
We offer our deepest sympathies and condolences to the individuals, families, and businesses affected by the California wildfires. We encourage you to share any information you have regarding relief opportunities for those affected.
If you or someone you know has questions regarding the tax relief opportunities, you are also welcome to reach out to our California-based regional directors John Frack and Michelle Laseman and they will be happy to assist you.
Information for those affected by Hurricane Harvey available here
Information for those located in Georgia that have been affected by Hurricane Irma available here
Information for those located in Florida that have been affected by Hurricane Irma available here