If you’ve been impacted by a hurricane, flood, wildfire, or other major disaster, the IRS may offer more relief than you think.

Whether you’re in Florida or elsewhere, federally declared disaster zones unlock a variety of tax benefits: from penalty-free retirement withdrawals to extended deadlines and tax-free payments. At Polaris Tax & Accounting, we help clients make the most of these hidden breaks—especially when they’re recovering from events beyond their control.

Here’s what you need to know if a disaster disrupted your life.

1. Extended IRS Deadlines

If the President declares your area a federal disaster zone, the IRS automatically extends filing and payment deadlines—usually by 60 days, and often up to one year.

✅ Applies to:

  • Personal and business returns
  • Estimated tax payments
  • Payroll and excise tax filings

📌 The IRS updates affected areas here: irs.gov/newsroom/tax-relief-in-disaster-situations

2. Penalty-Free Retirement Withdrawals (Up to $22,000)

Taxpayers affected by federally declared major disasters may withdraw up to $22,000 from IRAs, 401(k)s, or 403(b)s:

  • No 10% early withdrawal penalty
  • Income taxes on the distribution can be paid over three years

You can also recontribute the funds within three years to avoid taxes altogether.

⚠️ This relief applies only to disasters declared in 2020–2025 under the new legislation. Keep documentation of the date and type of event.

3. Tax-Free Disaster Relief Payments

If you received payments from:

  • FEMA or state/local governments
  • Nonprofit disaster relief organizations
  • Utility or mitigation programs

…these are likely not taxable if used for:

  • Medical costs
  • Temporary housing
  • Funeral or repair expenses
  • Hazard mitigation (e.g., flood prevention retrofits)

🔥 New in 2024: Qualified wildfire relief payments from 2020–2025 are explicitly excluded from income. That means you may even be eligible to amend past returns.

4. Deducting Disaster Losses (Without Itemizing)

If you had uninsured damage to your home, vehicle, or personal property, you may:

  • Deduct the loss without itemizing (thanks to the Federal Disaster Relief Act)
  • Add the loss amount to your standard deduction
  • Use the new $500 floor instead of the old 10% AGI threshold

📌 Learn how in our guide: How to Deduct Disaster Losses—What Florida Residents Need to Know

5. Tax-Free Gains from Insurance Proceeds

If your insurance payout exceeds the value of the damaged property (called a “casualty gain”), you normally owe tax. But two special rules apply:

✅ Involuntary Conversion Rule: Delay tax by reinvesting in similar property within 2 years (4 years if your main home was in a disaster area)

✅ Home Sale Gain Exclusion Rule: If your primary residence is destroyed, you can use the home sale exclusion ($250k single / $500k married) to reduce or eliminate the gain

Tip: Be sure your tax pro applies these correctly—casualty gains are often missed.

6. Amending Past Returns for Refunds

New law passed in late 2024 extends the statute of limitations to allow amended returns for disaster-related tax refunds—even for tax years 2020 and 2021.

✅ Wildfire victims especially may be eligible to file Form 1040-X and get money back for taxes they shouldn’t have paid on relief funds.

What You Should Do Now

If you were impacted by a disaster between 2020 and 2025:

  • Gather all FEMA, insurance, and nonprofit relief documentation
  • Check whether your area had a federal disaster declaration
  • Schedule a disaster tax review with Polaris—we’ll help you:
    • Claim missed deductions
    • Avoid unnecessary tax on relief payments
    • Defer or eliminate casualty gains

📍 Based in Plantation, FL, Polaris Tax & Accounting helps individuals and businesses nationwide navigate the disaster tax code with clarity and confidence.

👉 Schedule a consultation today to book a Disaster Tax Strategy Review before the next IRS deadline passes you by.