When disaster strikes—wildfires, floods, hurricanes—tax relief might be the last thing on your mind. But understanding how to deduct personal disaster losses can save you thousands.

If you’re a Florida resident or impacted by recent national disasters, there are provisions in the tax code that may allow you to deduct some of your uninsured losses, even without itemizing. But the rules are narrow, and many people miss out.

At Polaris Tax & Accounting, we’ve helped clients file amended returns, claim retroactive losses, and leverage disaster-related relief to reduce their tax bills—sometimes by thousands. Here’s how the IRS rules work, who qualifies, and what you should do right now.

What Losses Qualify for a Tax Deduction?

You can deduct disaster losses to personal property (home, vehicle, belongings), but only if the damage was caused by a federally declared disaster.

✅ Deductible: Hurricane damage from a named storm designated as a federal disaster.
❌ Not deductible: House fire caused by faulty wiring or lightning strike with no federal disaster declaration.

You Must First Subtract Insurance Reimbursement

The IRS only allows deductions for unreimbursed losses. That means:

  • You must subtract any insurance payments or reimbursements you received.
  • If you have insurance but don’t file a claim, you generally can’t deduct the loss.

⚠️ Exception: Business owners can deduct casualty losses without filing a claim—but this doesn’t apply to personal property.

Calculating the Loss Amount

Your deductible loss is the lesser of:

  1. The decline in fair market value (FMV) of the property due to the disaster
  2. The adjusted basis of the property (usually your cost)

Then subtract any insurance reimbursement.

Example:

  • Your home was worth $300,000 pre-hurricane and $100,000 after
  • You had $150,000 of insurance payout
  • Your deductible loss is limited to your adjusted basis minus reimbursement (if lower than FMV drop)

Tip: You can use a professional appraisal or repair cost estimate to calculate FMV decline.

The Old Rule vs. The New Relief Rule

❌ Old Rule (before 2020 and still applies in some cases):

  • First $100 of any loss is non-deductible
  • Then only the portion of the loss exceeding 10% of your AGI is deductible
  • You must itemize to claim the deduction (Schedule A)

✅ New Rule (Federal Disaster Relief Act of 2023):

  • Applies to major federal disasters from Jan 1, 2020 to Jan 11, 2025
  • $500 floor replaces the $100+10% AGI rule
  • You can claim disaster losses without itemizing
  • Net disaster losses can be added to your standard deduction

📌 This new rule also lets you amend old tax returns (like 2020–2022) to reclaim losses you couldn’t deduct under the old rules.

Additional Disaster Tax Relief You Should Know About

(See also: Wildfires, Floods, Hurricanes – How the IRS Has Your Back)

  • Extended filing deadlines: Up to one year for victims in federal disaster zones
  • Penalty-free IRA withdrawals (up to $22,000 for disaster recovery)
  • Tax-free disaster relief payments from governments or qualified charities
  • Casualty gains deferral for insurance proceeds used to rebuild/replace property

Action Steps for Florida Residents

  1. Check if your loss was part of a federally declared disaster (Search here)
  2. Calculate your adjusted basis and FMV drop
  3. Subtract insurance reimbursements
  4. Decide whether to amend prior returns (2020–2022 may now qualify)
  5. Talk to a tax professional if you’re unsure. Mistakes in disaster loss reporting are common—and costly.

📍 Based in Plantation, FL, Polaris Tax & Accounting works with clients impacted by hurricanes and natural disasters across the state.

👉  Schedule a consultation today  and learn what you may be entitled to reclaim.