Disaster Assistance and Emergency IRS Tax Relief: is it an automatic payment or do I have to apply for it?

Hurricane season is beginning to heat up in the Atlantic after an quiet start to 2022. Last week Hurricane Fiona had a devastating impact on Puerto Rico, leaving communities underwater and critical infrastructure destroyed.

Now, Hurricane Ian is thought to be moving towards the west coast of Florida and clocked sustained winds of 80mph over the weekend. The latest estimates suggest it could hit land by Wednesday.

It is a nightmare scenario but one which could soon become a reality for some who live in coastal areas in eastern parts of the United States. Hurricanes can be highly destructive and expensive, but there is tax relief available for those affected by disasters. In addition, victims are also offered a filing extension to help them deal with the fall-out of the disaster.

IRS offers tax rebates for hurricane loss victims

Although the support will not be instantaneous, those who have their home or personal belongings damaged by a hurricane are able to claim a ‘casualty loss’ for any property affected. The relief is only offered to those who suffer an unexpected loss, such as hurricane, tornado or earthquake, as opposed to normal wear and tear, like termite damage.

For victims making a claim on losses suffered from tax year 2018 to 2025, the incident must have been designated as a federally-declared disaster. This means that the president must have authorised the use of federal disaster funds to provide assistance in the area, as was the case in Puerto Rico recently.

In most instances, claimants will include the hurricane loss in their next tax filing. Any hurricane losses must be reported on Form 4864, Casualties and Thefts, to claim the relief. However, you will not receive the full value of your lost property and the IRS has a very specific formula to calculate how much your payment will be.

A statement from the IRS explains: “For property held by you for personal use, you must subtract $100 from each casualty or theft event that occurred during the year after you’ve subtracted any salvage value and any insurance or other reimbursement. Then add up all those amounts and subtract 10% of your adjusted gross income from that total to calculate your allowable casualty and theft losses for the year.”

All eligible losses must then be listed in an itemized deduction on Schedule A (Form 1040), Itemized Deductions. If you are successful then the amount will be deducted from your IRS tax bill, or added to your rebate if you are due one.

The process for claiming disaster assistance from the IRS can appear daunting but it offers a vital form of support for victims. For more information on claiming the support check out the IRS’ guide to Casualty, Disaster, and Theft Losses.