Does Hurricane Milton or Helene qualify as a Diaster Loss?

April, 08 2025 by Veselina Arangelova, EA

Hurricanes Milton and Helene: Qualifying as Disaster Losses and Tax Implications

In recent history, hurricanes have become not isolated events but rather the norm for thousands of families across America. Hurricanes Milton and Helene struck the southeastern United States in late 2024, leaving behind a trail of destruction and financial strain on the affected communities. Immense importance is placed on the preservation of human life during unstoppable and unavoidable storms, and rightfully so. In the immediate aftermath, another particularly important question comes to the forefront – how to move forward? In this blog, we will answer some of the most frequently asked questions about the tax implications of natural disasters that taxpayers should be aware of if they have suffered damage to their individual property because of these hurricanes.

 

What is a qualifying disaster loss?

In general, disaster loss is defined as damage to personal or business property that is a direct result from a sudden, unexpected, or unusual event, such as a hurricane. What makes the loss a qualified disaster loss is whether the event has been declared by the President as a major federal disaster. The declaration component is crucial, as only certain losses are eligible for tax deductions on your individual return under the Tax Cuts and Jobs Act of 2017.

Under the Tax Cuts and Jobs Act of 2017, personal casualty losses are not deductible unless caused by a federally declared disaster for tax years 2018 to 2025. This means that taxpayers affected by Milton and Helene can deduct their losses on their federal income tax returns because both hurricanes were declared federal major disasters in September of 2024 by then-President Biden. The deduction can be claimed in the year the loss occurred or elected to be claimed in the prior year.
 

Gathering Documents

Dealing with a disaster loss claim on your taxes is not always straightforward. A good starting point in any tax conundrum is trying to understand both the rules and regulations that apply to your situation and determining the supporting documents you may need. The Internal Revenue Service provides specific guidance on how to claim disaster losses and the documentation required for taxpayers to properly calculate and substantiate their claims. IRS Publication 547, Casualties, Disasters, and Theft provides taxpayers guidance on this subject. Once you have your reference documents in hand, you can begin figuring out what to report and where on your taxes.
 

Where to Report Casualty Loss Deduction?

Losses are reported on Form 4684, Casualties and Thefts, and this form must be a part of your return for you to make a claim. Before you figure out the loss amount to report on your return, there are a few items to consider: your basis in the property, the Fair Market Value of it, and any insurance reimbursements and payments you may have received before you figure out the total loss to report. Let’s discuss each of these below.

Basis is the adjusted basis of your property before the disaster takes place. Generally, your basis is the cost you paid for the property, plus any substantial improvements you’ve made and minus the amount of any depreciation previously deducted. Then you need to consider what the decrease in your property’s Fair Market Value, FMV, is due to the disaster. There is detailed guidance on how to calculate the FMV if it hasn’t been calculated already for you by an appraiser. For more detailed guidance, refer to Pub. 547.

It is important to note insurance proceeds and other reimbursements that you have received, since these may reduce the amount of loss you can claim on your return. Employer emergency disaster funds are common, and they are a type of reimbursement you may need to consider in your calculations. If the funds were specifically for the rehabilitation of your property, then you must report them alongside your insurance reimbursements. If you used the funds for lodging, food, medical expenses or anything else not related to repairing your home, then don’t include the money in your calculations.

One item that you should not consider and skip altogether is the cost of protection of your property. For example, any money you spent on insurance or to board up your house in anticipation of a storm should not be included into your basis or FMV calculations as they are not part of the loss or deductible.

Easy–peasy, right? Luckily, you do not have to do manual calculations as tax preparation programs do that for you, but it cannot be done right if you do not have all your documents to provide the correct inputs. If documents were destroyed in the disaster, review Pub. 547 for further guidance on how to reconstruct the records. Retrieving your Wage and Income and Account transcripts from the IRS is a fantastic way to reconstruct some lost records. You can read more about that here.
 

Additional Tax Implications

When disasters of this magnitude occur, affected taxpayers often are eligible to postpone filing and paying their personal and business tax returns. Due to hurricanes Helene and Milton, taxpayers have until May 1, 2025, to file their returns and pay the tax due. Those eligible for the extension include:

• Those who live in the covered disaster areas,
• Those whose primary place of business is in the covered disaster areas, or
• Those who provide relief or assist in the relief activities in the covered disaster areas.

This new May 1, 2025, filing deadline applies to:

• Individuals with a valid extension file their 2023 return. Taxpayers who submitted an extension on their 2023 return originally had until Oct. 15, 2024, to file their return. The IRS noted, however, that because tax payments related to 2023 returns were due on April 15, 2024, those payments are not eligible for this relief.
• Calendar-year corporations whose 2023 extensions ran out on Oct. 15, 2024. As with individuals, corporations had until April 15, 2024, to pay any tax due.
• Any calendar-year 2024 individual or business returns ordinarily due during March or April 2025.
• Any payment usually due during the postponement period (October 5, 2024, to May 1, 2025), including the quarterly estimated tax payments due on Jan. 15, 2025, and April 15, 2025.
• Any quarterly payroll and excise tax returns that are usually due on Oct. 31, 2024, Jan. 31, 2025, and April 30, 2025.

One exception to the May 1 deadline is payroll and excise tax deposits due on or after Sept. 25, 2024, and before Oct. 10, 2024. If paid by the Oct.10 deadline, no penalties will be assessed. If any are, they will be abated if the tax deposits were made timely.

If an affected taxpayer receives a late filing or past-due payment penalty notice from the IRS, the agency suggests the taxpayer call the telephone number on the notice to have the penalty abated. They are committed to identifying taxpayers located in the covered disaster areas and applying the announced filing and payment relief automatically.

If you are affected and have received a notice and do not feel comfortable navigating the process on your own, reach out to us. We are ready to help.