Tax Relief for LA Wildfire Victims: How to Claim Casualty Losses

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Yes, individuals affected by the recent wildfires in Los Angeles should consider claiming a casualty loss on their taxes. Here’s a detailed explanation of the process and benefits:

Claiming a Casualty Loss

  1. Qualification Criteria:
    • You can claim a casualty loss if the loss occurred due to a federally declared disaster, such as the Los Angeles wildfires. The wildfires in Los Angeles have been federally declared disasters, making affected individuals eligible to claim these losses on their taxes.
  2. Filing Options:
    • Affected taxpayers can choose to claim the casualty loss on either the current year’s tax return (2025) or the prior year’s return (2024). This flexibility allows individuals to select the year that provides the most favorable tax outcome.
  3. Tax Relief:
    • The IRS and California Franchise Tax Board (FTB) have provided various relief measures, including extended deadlines for filing and paying taxes. For instance, the deadline for filing 2024 tax returns and making payments has been extended to October 15, 2025. This extension applies to individual income tax returns, quarterly estimated taxes, and other tax-related actions.
  4. How to Claim:
    • To claim a casualty loss, you need to complete the federal Form 4684 for casualties and thefts. You should also write the FEMA declaration number (4856-DR) on any return claiming a loss.
    • You can deduct the loss on your tax return for the year the loss occurred. Make sure to include any costs you incur to determine the loss, such as appraisal fees.
  5. Additional Considerations:
    • If the loss is insured, you must reduce the loss by the amount of any insurance or other reimbursements received or expected to be received. Only the uninsured portion of the loss can be claimed as a deduction.
    • The IRS and FTB are offering automatic filing and penalty relief to taxpayers with addresses in the disaster area. You do not need to contact the IRS to receive this relief if your address is in the designated disaster area.
  6. Property Tax Relief:
    • Property owners whose homes or businesses have been damaged or destroyed by the wildfires may also qualify for property tax relief. This includes a temporary reduction in property taxes and potential refunds if taxes have already been paid. To qualify, property owners must file a claim with their County Assessor’s Office within 12 months from the date of damage.

Conclusion

Claiming a casualty loss can provide significant tax relief for individuals affected by the Los Angeles wildfires. By following the appropriate steps and utilizing the available tax relief measures, affected taxpayers can mitigate the financial impact of the disaster. It is advisable to consult with a tax advisor to ensure all eligible deductions and relief options are utilized effectively.