California tax relief
Published on February 26, 2025
by Clark Stott
Reviewed by: Aya Takriti
Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.
Table of Contents
How can wildfire victims in California claim tax relief?
People affected by the January 2025 wildfires in Los Angeles County may qualify for tax relief, including extended deadlines, deductions for property damage, and other financial assistance.
The IRS and the California Franchise Tax Board (FTB) offer special tax provisions to help individuals and businesses recover.
Who qualifies for this tax relief?
If you live in or own a business in Los Angeles County, you automatically qualify for IRS disaster tax relief. If more areas are later declared disaster zones by FEMA, they may also receive tax benefits.
How do I claim a tax deduction for disaster losses?
If your home, car, or personal belongings were damaged in the wildfires and insurance didn’t cover everything, you may be able to claim a casualty loss deduction. To qualify:
- Calculate how much your property was worth before and after the wildfire.
- Subtract any money you received from insurance or disaster relief programs.
- Your loss must be more than 10% of your adjusted gross income (AGI) to qualify for a tax deduction.
- You must file IRS Form 4684 (Casualties and Thefts) with your tax return.
If you want a faster refund, you can claim the loss on last year’s tax return instead of waiting until next year. This is called a disaster loss election, and it can help you get money back sooner.
Publication 547 explains this in detail.
What other tax benefits are there for wildfire victims?
- Extended Tax Deadlines – You now have until October 15, 2025, to file your 2024 taxes and make payments.
- Penalty-Free Retirement Withdrawals – If you need money to recover, you may withdraw up to US$22,000 from your 401(k) or IRA without paying an early withdrawal penalty.
- Property Tax Adjustments – If your home was damaged, you can ask for a property tax reassessment, which may lower your tax bill.
What help does the Employment Development Department (EDD) provide for businesses?
The California Employment Development Department (EDD) provides tax relief and financial aid to businesses affected by the wildfires.
What support is available?
- Payroll Tax Extensions – If your business is in a disaster area, you may get an extra two months to file payroll taxes.
- Disaster Unemployment Assistance (DUA) – If you lost work or had to close your business because of the wildfire, you may qualify for temporary unemployment benefits.
- Emergency Help for Businesses – The EDD Disaster Services Unit provides financial assistance to businesses in Los Angeles and Ventura counties that were affected by fires and windstorms.
Businesses should contact the EDD for more details on how to apply for these programs.
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How do the IRS and California coordinate tax relief for disaster victims?
The IRS and the California Franchise Tax Board (FTB) coordinate to make sure wildfire victims get the federal and state tax relief they need.
- Deadline Extensions – Both the IRS and FTB have pushed tax deadlines to October 15, 2025, for affected individuals and businesses.
- Automatic Relief – If your address is in a disaster zone, you don’t need to apply—the IRS automatically gives you extra time to file and pay.
- State and Federal Tax Deductions – California offers additional tax deductions for disaster losses, separate from those provided by the IRS.
- Tax-Free Disaster Assistance – If you receive FEMA aid or financial assistance, you don’t have to pay taxes on that money.
If you were affected by the wildfires, check the IRS and California FTB website or speak with a tax professional to ensure you receive all available benefits.
What are qualified disaster relief payments and are they taxable?
These payments can come from the government, employers, or charities, and in most cases, they are not taxable under Section 139 of the tax code.
What can disaster relief payments be used for?
- Daily living expenses – Temporary housing, food, transportation, and other basic needs.
- Home repairs – Fixing or rebuilding homes damaged by the wildfires.
- Replacing household items – Furniture, appliances, and other belongings lost in the fire.
- Medical costs – Treatment for injuries or health issues caused by the disaster.
- Funeral expenses – Costs related to a death caused by the wildfire.
When are disaster relief payments tax-free?
- If the government or a qualified organization gives you money to cover wildfire-related losses, you don’t have to report it as income on your tax return.
- If your insurance reimburses you for a loss, the payment is not considered disaster relief and may be taxable depending on your policy.
These rules help ensure that financial help given to wildfire victims is not taxed, so you can focus on rebuilding.
What steps should you take to claim tax relief after a wildfire?
Step 1: Check If You Qualify for Disaster Tax Relief
- If you live in or own a business in Los Angeles County, you automatically qualify for IRS tax relief.
- If FEMA adds more areas to the disaster list, those residents may also get tax benefits.
Step 2: Claim a Casualty Loss Deduction
- If you had uninsured losses, you might be able to claim a tax deduction for property damage.
- Use IRS Form 4684 (Casualties and Thefts) to report losses and include it with your tax return.
Step 3: Choose Which Year to Claim Your Loss
- You can claim your losses on last year’s tax return instead of waiting for this year’s filing.
- This may get you a faster tax refund to help cover recovery costs.
Step 4: Consider Hardship Withdrawals from Retirement Accounts
- If you need money, you may withdraw up to US$22,000 from an IRA or 401(k) without paying an early withdrawal penalty.
- However, income tax still applies unless you repay the amount within three years.
Step 5: Seek Help from a Tax Professional
- If you own a business, you might need help with disaster recovery plans and insurance claims.
- Tax professionals can help you claim deductions and make sure you get all available tax benefits.
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