Financial Relief Options for Los Angeles Wildfires
Wildfires, hurricanes, flooding, and natural disasters have become an increasingly frequent and devastating occurrence across the United States. The most severe and widespread fires of 2025 are those that have affected and continue to threaten Los Angeles County, causing significant destruction to homes, businesses, and the environment. While the emotional and physical toll on affected residents is immeasurable, there are also financial consequences that individuals and businesses must face—some of which can be mitigated through tax relief and planning.
This article explores the key tax implications following the Los Angeles fires, including federal and state tax relief programs, deductions, and credits that could help alleviate the burden of recovery.
FEMA and IRS Disaster Relief: Immediate Tax Benefits
The Federal Emergency Management Agency (FEMA) provides assistance to those who have suffered losses due to wildfires, and the IRS often follows suit with specific tax relief provisions for those affected.
Federal Tax Relief: The IRS has granted certain tax relief to wildfire victims.
Extension of Tax Deadlines: The IRS has granted taxpayers in federally declared disaster areas an automatic extension of time to file tax returns and pay any taxes due. Taxpayers located in Los Angeles County have until October 15, 2025, to meet filing and payment deadlines that normally occur between January 7, 2025 and October 15, 2025. (IRS 1/10/25 Announcement ) As a result, affected individuals and businesses will have until October 15, 2025, to file returns and pay any taxes that were originally due during this period. This relief should be applied automatically based on your last return on file, but can be requested if you moved to Los Angeles County within the last year. Taxpayers with tax accountants in Los Angeles County may also qualify for the deadline and payment relief.
This means that the October 15, 2025 deadline will now apply to:
2024 quarterly estimated income tax payments normally due on January 15, 2025, and estimated tax payments normally due on April 15, June 16, and September 15, 2025;
Quarterly payroll and excise tax returns normally due on January 31, April 30, and July 31, 2025;
Individual income tax returns and payments normally due on April 15, 2025;
2024 contributions to IRAs and health savings accounts for eligible taxpayers;
Calendar-year partnership and S corporation returns normally due on March 17, 2025;
Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2025; and
Calendar-year tax-exempt organization returns normally due on May 15, 2025.
Casualty Loss Deductions: Those who experience property damage from a wildfire may be eligible to deduct casualty losses on their federal tax return. A casualty loss occurs when property is destroyed or damaged by a sudden, unexpected event such as a fire. Victims of a fire in Los Angeles may be able to write off part of their losses, including damage to their home, personal belongings, or business property. They can claim this on their current 2025 tax returns, or the losses can be claimed on a prior year 2024 tax return.
It's important to note that casualty losses related to a federally declared disaster are not subject to the usual threshold requirements for claiming a deduction. Normally, losses must exceed 10% of a taxpayer’s adjusted gross income (AGI) before being deductible, but in the case of disasters, the IRS allows deductions without this limitation.
Disaster Relief Grants: If you received a FEMA grant or assistance (such as for temporary housing or home repairs), the IRS will generally not tax that aid as income. However, if you receive insurance payments or other forms of compensation for damages, those may need to be reported and could affect your taxable income.
California State Tax Relief: The FTB has also granted tax relief to the taxpayers of Los Angeles County. According to the Governor’s announcement, this includes relief from the following deadlines:
Quarterly estimated tax payments normally due on January 15, April 15, June 15, and September 15, 2025;
Passthrough entity elective tax payments normally due on March 15 and June 15, 2025;
Business entity corporate or passthrough entity tax returns normally due on March 15 and April 15, 2025;
Individual tax returns and payments normally due on April 15, 2025; and
Tax-exempt organization returns normally due on May 15, 2025.
Property Tax Relief: If your property was damaged or destroyed, you may be eligible for a reassessment of its value. This could lead to a reduction in your property tax liability for the year. Homeowners who are severely impacted by the fires can file for a reassessment with the county assessor’s office, which could provide substantial relief. Claim forms can be found here.
The payment deadline for property taxes has also been delayed in certain zip codes. For a list of the zip codes, see the full executive order from the Governor here.
Insurance and Recovery: The Tax Impact
While insurance payments provide crucial financial relief to fire victims, these payments may also have tax implications.
Property Insurance Payments: If you receive an insurance payout to cover property damage or loss, the proceeds may not be taxable if they are used to repair or replace the property. However, if the payout exceeds the cost to repair the damage or replace the property, the difference could be considered taxable income.
For example, if your home was insured for $500,000, and the insurance payout exceeds the actual loss incurred (say, the value of your loss was $400,000), you might have taxable income on the $100,000 difference. However, if the replacement costs are the same as the insurance payout, there would typically be no tax liability.
Business Insurance: For businesses that were affected by the fires, insurance payouts are treated similarly. If insurance proceeds are used to repair or replace damaged assets (e.g., business property, equipment, inventory), they are generally not taxable. However, if the payout exceeds the actual losses, the excess could result in taxable income.
FEMA Grants: FEMA disaster assistance is typically non-taxable, but if the grant is used for a purpose other than home repair or temporary housing (e.g., business recovery), it might affect your tax liability, so keeping detailed records is essential.
Gifting: In general, gift recipients have no tax reporting requirements and are free to accept the help of their communities without regard to tax consequences.
Those that generously show their support with gifts of cash and property, may be able to claim a charitable contribution deduction on their tax returns. Charitable donations must be made to a recognized 501(c)3 organization and the deductible portion of your gift cannot include any value you have received. We caution that unscrupulous opportunists will attempt to exploit the situation. We suggest contributing to organizations with a proven record of effective community support.
Conclusion
Both the IRS and the California state government offer a range of relief options for victims of wildfires, including extensions for tax filings, deductions for casualty losses, and exemptions for certain disaster-related grants.
By staying informed about tax relief programs, documenting losses accurately, and seeking professional advice, you can ensure that you are taking full advantage of the financial assistance available to help you rebuild after a disaster. While tax relief can’t replace what was lost, it can be a vital part of the recovery process, helping to ease the financial challenges that come with rebuilding lives and homes.
