Tax Tip Tuesday: FDTRA Expands Casualty Loss Deductions for Disaster Victims

Under the Federal Disaster Tax Relief Act (FDTRA), taxpayers affected by presidentially declared natural disasters may now qualify for a casualty loss deduction—even if they were previously ineligible. The streamlined process significantly reduces the burden of claiming relief for disaster-related losses.

FDTRA Eases the Burden of Disaster Loss Deductions

Previously, claiming a casualty loss deduction was complicated. Taxpayers had to itemize deductions, apply a $100 reduction per loss, and meet a 10 percent adjusted gross income (AGI) threshold.

Under the FDTRA, those restrictions are gone if your loss meets the following criteria:

• The disaster occurred between December 28, 2019, and December 12, 2024.

• A presidential disaster declaration was issued between January 1, 2020, and February 10, 2025.

The FDTRA makes each qualified loss deductible after a flat $500 reduction, and itemizing is no longer required. For more detailed IRS guidance, refer to Publication 547: Casualty, Disaster, and Theft Losses.

Timing Options Could Boost Your Refund

Casualty losses typically are deducted in the year they occur. The FDTRA allows you to apply the deduction to the previous tax year. This flexibility could lead to a larger refund. For example, if your home was damaged in a 2022 hurricane but your insurance claim was denied in 2024, you can now claim that loss on your 2023 return and potentially increase your refund.

How to File for the Tax Break

Have you already filed your tax return? No problem. You can amend your return to claim the relief. Just file electronically or submit Form 1040-X to make the change. Want your refund faster? Choose direct deposit when filing electronically to speed things up.

Here to Help

Not sure if your loss qualifies under the new rules? Our team can walk you through the process and help you recover any eligible refunds. If you have any additional questions, we are here to help. We build value-added relationships with each client to understand their business structure and provide solid solutions. Our approach offers direct access to the firm's decision-makers. Our innovative cross-functional services help businesses address the challenges ahead.