My North Carolina home was hit hard by Hurricane Helene, resulting in $78,000 in damages — can I deduct those big losses on my 2025 tax return?

Can you deduct disaster losses?

The IRS allows deductions for certain disaster-related losses, but there are strict qualifications.

First, the damage must result from a federally declared disaster, and Hurricane Helene qualifies. This means losses tied to unexpected, sudden events like hurricanes, floods, or fires may be eligible. Gradual wear and tear or damage due to negligence, however, won’t make the cut.

According to the IRS, to deduct your losses, they must exceed your insurance reimbursement.

For example, if you suffered $78,000 in damages but received $48,000 from your insurer, only the uncovered $30,000 can be considered. You’ll also owe the IRS a share, depending on whether your losses can be attributed to a federally declared disaster.

Homeowners who suffered losses due to federally declared disasters — like Hurricane Helene — would be subject to a deductible of $100 per casualty and a reduction equivalent to 10% of the claimant’s adjusted gross income (AGI). In the situation where your damage is the result of a qualified disaster loss, you won’t be subject to the 10% reduction, but the deductible raises to $500.

For a taxpayer with an AGI of $75,000, this would mean deducting $7,600 ($100 + 10% of $75,000), leaving $22,400 as potentially deductible.

While the math can be daunting, it’s important to remember that this is a federal effort to ease the financial strain of disasters, albeit with limitations. Deductible losses don’t include luxury upgrades during repairs or temporary relocation expenses.

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Filing extensions for Hurricane Helene victims

Even if your losses don’t qualify for a full deduction, there’s some relief for those recovering from Hurricane Helene. The IRS has extended key tax deadlines for disaster-affected residents, pushing various 2024 filings and payments to May 1, 2025.

This includes individual and business tax returns, estimated payments, and retirement contributions. For those juggling post-disaster repairs, this extension provides breathing room to manage both finances and recovery efforts.

Steps to claim a casualty loss deduction

Navigating the process of claiming a casualty loss deduction requires attention to detail. Start by documenting all related expenses thoroughly. This includes repair estimates, receipts, photos of the damage, and insurance claim records. These will substantiate your claim and are invaluable in case of an audit.

You’ll need to complete IRS Form 4684, which calculates the amount of your deductible loss. Attach this to your tax return when filing.

Additionally, if you want faster relief, you can choose to claim the loss on your 2023 tax return by filing an amended return rather than waiting to include it on your 2024 taxes. (Note: This option is only available for losses in federally declared disaster areas.)

Given the complexity of casualty deductions, consulting with a tax professional is highly recommended. They can help ensure you’re maximizing benefits while complying with IRS guidelines.

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Why tax relief isn’t the whole solution

While casualty loss deductions and extended deadlines provide some financial relief, they don’t address the full recovery costs. To better prepare for future disasters, it’s important to take proactive steps:

Review your insurance policies: Ensure adequate coverage for disasters common in your region, like hurricanes or floods. Standard homeowners’ policies often exclude certain types of damage, so additional riders or separate policies may be necessary.

Build an emergency fund: Having three to six months of expenses saved in an emergency fund can cover gaps left by insurance or non-deductible costs.

Stay informed: Monitor IRS announcements for disaster relief measures, which can offer extensions or other financial benefits.