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Tax Relief Updates for California Wildfire Victims

• Tax Alert

Disclaimer (Updated: 01/28/25)
The information provided on this page is for general informational purposes only and reflects updates as of 01/28/25. Tax laws, regulations, and relief measures may change, and interpretations may vary. For the most accurate and up-to-date guidance, please consult with a qualified tax professional or legal advisor, or refer directly to official resources as indicated on this page.

Timing of Taking Unreimbursed Disaster-Related Losses

In the aftermath of the Los Angeles wildfires, understanding the timing for claiming unreimbursed disaster-related losses is crucial for optimizing tax benefits. Here’s a comprehensive guide to assist you:

1. Claiming Disaster Losses on Federal Tax Returns

The Internal Revenue Code allows taxpayers to deduct losses from federally declared disasters in one of two ways:

  • In the Year the Disaster Occurred (2025): You can claim the loss on your 2025 tax return, filed in 2026.
  • In the Prior Year (2024): Alternatively, you can claim the loss on your 2024 tax return. If you have already filed your 2024 tax return, you must file an amended return no later than six months after the original due date of your 2025 tax return (without extensions). For most taxpayers, this deadline is October 15, 2026.

Election Deadline:
To claim the loss on your already filed 2024 return, you must make the election by filing an amended return no later than six months after the original due date of your 2025 tax return (without extensions). For most taxpayers, this deadline is October 15, 2026.

For more details, visit the IRS’s Tax Relief in Disaster Situations page or consult Publication 547: Casualties, Disasters, and Thefts.

2. Disaster Relief Payments Exclusion

If you received disaster relief payments related to federally declared disasters, these payments are excluded from gross income. This includes disaster relief payments for personal, family, and funeral expenses, as well as home repair costs. Ensure you document the nature of the payments and confirm they are qualified to avoid reporting taxable income.

For more details, visit the IRS’s Tax Relief in Disaster Situations page or consult Publication 547: Casualties, Disasters, and Thefts.

3. Claiming Disaster Losses on California State Tax Returns

California conforms to federal guidelines, allowing similar flexibility:

  • In the Year of Loss (2025): Deduct the loss on your 2025 California state tax return.
  • In the Prior Year (2024): Elect to claim the loss on your 2024 state tax return. If you have already filed your 2024 tax return, you must file an amended return.
  • Elect to Claim the Loss on Your 2024 Return: To claim the loss on your already filed 2024 California state tax return, you must file an amended return no later than October 15, 2026, to align with the federal deadline.

How to Claim:

  • Write the name of the disaster (e.g., “Los Angeles Wildfires 2025”) in blue or black ink at the top of your California tax return.
  • Include a statement detailing the date and location of the disaster and your decision to claim the loss in the prior tax year.

For more information, refer to the California Franchise Tax Board’s Disaster Loss How-To Guide (FTB Publication 1034).

4. Calculating and Documenting Your Loss

  • Determine the Loss Amount:
    Calculate the decrease in fair market value of the property, subtracting any insurance or other reimbursements received.
  • Maintain Records:
    Keep thorough documentation, including:
    • Photographs of the damage
    • Repair estimates
    • Insurance claims
    • Related correspondence

Details on calculating losses can be found in the IRS’s Publication 547.

5. Additional Resources

6. Professional Assistance

Given the complexities involved, consulting with a tax professional experienced in disaster-related tax matters is advisable to ensure compliance and maximize available benefits. If you or your business needs assistance navigating these relief options or filing the necessary documents, our team is here to help. Please don’t hesitate to contact us for guidance or support.

Property Tax Deadlines Postponed for Los Angeles County Wildfire Victims

As a result of an executive order issued by Governor Newsom, Los Angeles County has announced property tax relief for affected taxpayers, allowing extended time to file and pay property taxes.

Postponement of Property Tax Deadlines:

  • Taxpayers in the following ZIP codes affected by the wildfires may postpone their property tax payments and business personal property tax statement filings until April 10, 2026, without penalties or interest:
    • 90019, 90041, 90049, 90066, 90265, 90272, 90290, 90402, 91001, 91040, 91104, 91106, 91107, 93535, 93536
  • The postponement does not apply to payments made through an impound account or to taxes that were already delinquent as of January 6, 2025.

Reassessment of Damaged or Destroyed Property

If your property was damaged or destroyed during the recent wildfires in Los Angeles County, you may qualify for a reassessment of your property’s value to reduce your property tax obligations. A reassessment can lower your property taxes to reflect the reduced value of your property following the disaster.

To apply for reassessment, follow these steps:

  1. File Form ADS-820, “Application for Reassessment: Property Damaged or Destroyed by Misfortune or Calamity” with the Los Angeles County Assessor’s Office.
  2. Submit the application within 12 months of the date the property was damaged or destroyed.
  3. Ensure the loss exceeds $10,000 in current market value.

For more detailed instructions and to download the application form, visit the Los Angeles County Assessor’s Disaster Relief page or directly access the Form ADS-820 here.

Additional Assistance Available:

  • Further suspension of penalties and interest for up to four years can be requested by submitting a Penalty Cancellation Request Form to the Los Angeles County Treasurer and Tax Collector.

How to Access Assistance:

To take advantage of these programs:

  • For property reassessment, visit the Los Angeles County Assessor’s Disaster Relief page.
  • For penalty and interest relief, visit the Los Angeles County Treasurer and Tax Collector’s FAQ.

These measures are designed to provide financial and administrative relief for those affected by the wildfires. If you qualify, take advantage of these programs to ease your tax burden. For assistance with applications or additional questions, contact us or reach out directly to the appropriate agency.

Payroll Tax and Sales and Use Tax Relief for Wildfire Victims

Payroll Tax Relief:

Employers in Los Angeles and Ventura Counties directly impacted by the recent wildfires can request up to a 60-day extension to file state payroll reports and deposit payroll taxes without penalties or interest.

How to Request an Extension:

  • Written Request: Submit a written request to the Employment Development Department (EDD) within two months of an original payment or return due date.
  • Contact Information: For detailed instructions and contact information, visit the EDD.

Sales and Use Tax Relief:

The California Department of Tax and Fee Administration (CDTFA) has extended the January 31, 2025 sales and use tax filing deadline for impacted Los Angeles County taxpayers until April 30, 2025.

Additional Relief:

Per the EDD and CDTFA, a taxpayer will be considered “directly affected” if their tax preparer is directly affected by the wildfires (e.g., due to power outages, evacuation orders, or worse).

NOTE: This relief is not automatic. Taxpayers must submit requests for relief.

Federal Disaster Tax Relief Act of 2023 (FDTRA)

The Federal Disaster Tax Relief Act of 2023 (FDTRA), signed into law by President Biden on December 12, 2024, introduces significant tax relief measures for individuals and businesses affected by natural disasters. However,  notably, this legislation enacted on December 12, 2024, does not provide qualified disaster loss relief for California fire victims. This legislation was written in a manner that refers to and incorporates previously enacted legislation, the Taxpayer Certainty and Disaster Relief Act of 2020.  To be considered qualified, a disaster must be declared by the president between January. 1, 2020, and February 10, 2025.   Furthermore, the incident date of the disaster must have generally began on or before Dec. 12, 2024. Consequently, the 2025 California wildfires do not meet the criteria for a qualified disaster loss in terms of eligibility for a more generous personal casualty loss deduction.   With the California fires causing immense damage, Congress may act quickly to pass more favorable disaster relief legislation to classify the California wildfires as such.

Additional Resources:

These measures aim to alleviate the financial burden on those affected by natural disasters, offering critical tax relief and support during recovery.

Employment and Business Relief for Wildfire Victims

In the wake of the recent wildfires, California offers financial and administrative relief for workers and businesses impacted by the disaster.

Unemployment Benefits and Disaster Unemployment Assistance (DUA)

If you, or someone you know, has lost a job or had hours reduced due to the wildfires, unemployment benefits are available. The one-week waiting period has been waived, meaning benefits will begin the first week of unemployment.

Disaster Unemployment Assistance (DUA) is also available for workers and self-employed individuals in Los Angeles County who are affected by the wildfires. DUA provides support for those who are not eligible for regular unemployment benefits.

Key Details:

  • DUA covers losses beginning January 12, 2025.
  • Claims must be filed by March 10, 2025.
  • Apply for benefits through myEDD and indicate your job loss is due to the disaster.

Disability and Paid Family Leave Benefits

  • Workers who were injured or whose health was impacted by the fires may apply for Disability Benefits.
  • Those needing to take time off to care for a family member may qualify for Paid Family Leave Benefits.
  • Eligibility: Citizenship or immigration status does not affect your ability to qualify for these programs.

Relief for Employers

Employers affected by the wildfires can request a 60-day extension to file payroll reports and taxes without penalties.

For detailed instructions or to request an extension, visit the EDD Disaster Resources Page.

Note: Governor Gavin Newsom has also announced $20 million to create temporary jobs in impacted areas and provide workers with supportive services. Workers can contact their America’s Job Center of California for more information.

WE ARE HERE TO HELP!

At Duffy Kruspodin, LLP, we understand the significant challenges that individuals and businesses face in the aftermath of the Los Angeles wildfires. The tax relief measures and resources outlined on this page are designed to provide financial and administrative support during this difficult time. If you or your business needs assistance navigating these options, understanding eligibility, or filing the necessary documents, our team is here to help. Don’t hesitate to contact us for expert guidance and support tailored to your unique situation.