California tax relief
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Table of Contents
How can California wildfire victims access tax relief in 2025?
Individuals and businesses affected by the January 2025 wildfires in Los Angeles County may be eligible for tax relief, including deadline extensions, deductions for property losses, and other forms of financial assistance.
The IRS and the California Franchise Tax Board (FTB) provide tax provisions designed to help those impacted by natural disasters recover financially.
Who is eligible for wildfire tax relief?
Residents and business owners in Los Angeles County automatically qualify for IRS disaster tax relief. If FEMA designates additional disaster areas, those locations may also become eligible for tax benefits.
How can wildfire victims claim a tax deduction for property losses?
If your home, vehicle, or personal property was damaged and insurance did not cover all losses, you may qualify for a casualty loss deduction. To claim this deduction:
- Assess the fair market value of the property before and after the wildfire.
- Subtract any insurance payouts or financial assistance received.
- Your total loss must exceed 10% of your adjusted gross income (AGI) to be deductible.
- File IRS Form 4684 (Casualties and Thefts) along with your tax return.
To receive a quicker refund, you have the option to claim your loss on your prior year’s tax return instead of waiting for the current tax year. This process, known as a disaster loss election, can help expedite financial recovery.
What other tax relief measures are available for wildfire victims?
- Extended tax deadlines – The filing and payment deadline for 2024 tax returns has been extended to October 15, 2025.
- Penalty-free retirement withdrawals – Affected individuals can withdraw up to US$22,000 from a 401(k) or IRA without an early withdrawal penalty.
- Property tax reassessments – Homeowners can request a reassessment of their property value, potentially lowering their property tax obligations.
How does the Employment Development Department (EDD) assist affected businesses?
The California Employment Development Department (EDD) offers tax relief and financial support for businesses impacted by the wildfires.
What assistance is available to businesses?
- Payroll tax filing extensions – Businesses in designated disaster areas may receive a two-month extension to file payroll taxes.
- Disaster Unemployment Assistance (DUA) – Business owners and workers who lost income due to wildfire-related disruptions may qualify for temporary unemployment benefits.
- Emergency financial support – The EDD Disaster Services Unit provides aid to businesses in Los Angeles and Ventura counties affected by wildfires and severe weather conditions.
Business owners should contact the EDD to learn more about available programs and application requirements.
Find out if you’re qualified for the California tax relief. Connect with a tax pro today.
How do the IRS and California coordinate tax relief for disaster victims?
The IRS and California Franchise Tax Board work together to ensure that eligible wildfire victims receive the tax relief they qualify for.
- Deadline extensions – Both agencies have extended tax deadlines to October 15, 2025, for individuals and businesses in affected areas.
- Automatic relief – Taxpayers in FEMA-declared disaster zones do not need to apply for extensions; they are granted automatically.
- State and federal tax deductions – California provides additional state-level tax deductions for disaster-related losses, separate from federal relief options.
- Tax-free disaster aid – FEMA and other financial assistance received due to wildfire damage are not considered taxable income.
Taxpayers should review the IRS and FTB websites or consult a tax professional to ensure they receive all available relief options.
What are qualified disaster relief payments, and are they taxable?
Qualified disaster relief payments come from government agencies, employers, or charitable organizations and are generally not taxable under Section 139 of the tax code.
What expenses can these payments cover?
- Temporary housing, food, and transportation expenses.
- Home repairs or rebuilding costs.
- Replacement of damaged personal belongings, such as furniture and appliances.
- Medical expenses related to wildfire injuries or health issues.
- Funeral costs for wildfire-related fatalities.
When are disaster relief payments tax-exempt?
If funds are received from the government or a qualified organization to cover wildfire-related losses, they are not considered taxable income. However, if an insurance company reimburses a loss, the payment may be taxable depending on policy terms.
These tax rules are designed to ensure that financial aid for wildfire victims remains untaxed, allowing individuals and businesses to focus on recovery.
What steps should wildfire victims take to claim tax relief?
Step 1: Verify eligibility – Individuals and businesses in designated disaster zones qualify for automatic IRS tax relief.
Step 2: Report property losses – Use IRS Form 4684 to document casualty losses and include it in your tax return.
Step 3: Decide which tax year to claim the loss – Taxpayers can apply losses to the previous year’s return for a faster refund.
Step 4: Evaluate retirement account options – If funds are needed, up to US$22,000 can be withdrawn from retirement accounts without an early withdrawal penalty. Standard income taxes still apply unless repaid within three years.
Step 5: Consult a tax professional – Business owners and individuals may need assistance navigating tax deductions and disaster-related claims to maximize available benefits.
Additional resources and compliance
Individuals and businesses affected by the wildfires have access to various resources that can help them understand their tax relief options and compliance requirements. Organizations such as ADP offer practical tools and updates through their ADP Eye on Washington reports, providing insights into federal and state tax law changes and regulatory requirements.
For businesses, staying compliant with business compliance regulations is still crucial, especially when applying for tax relief or financial aid. Employers should keep track of any legislation that may impact their tax responsibilities and ensure they meet all necessary compliance requirements.
Professional guidance is also available through tax advisors and legal advisors, who can offer tax or legal advice related to disaster relief claims.
