Natural disasters often lead to financial disaster, as those affected struggle to recover and meet their financial obligations while waiting for much-needed relief. A 2025 survey conducted by The Harris Poll on behalf of the AICPA found that 43% of respondents have been personally impacted by a natural disaster.
After an earthquake, hurricane, tornado or flood, taxes are often the last thing on anybody’s mind. Yet 25% of respondents said it took between one and six months to receive tax relief from the federal government, and 28% said it took more than six months and up to a year.
Tax relief available after a disaster
Several types of tax relief may be available to individuals in disaster zones:
Casualty loss deductions. If property damage is sustained after a disaster, you may be able to claim a casualty loss deduction on your federal tax return for damage to home, vehicles, or personal property that was not reimbursed by insurance. Normally, you must itemize deductions in order to claim this type of deduction, but there are exceptions, and after certain disasters, Congress has often passed special legislation to allow for the deduction to be taken above the line.
Filing and payment extensions. The IRS routinely grants automatic filing and payment extensions for taxpayers in federally declared disaster ones. However, always check the IRS website to confirm that your area qualifies.
Penalty-free retirement fund withdrawals. Normally, early withdrawals from retirement accounts like 401(k)s or IRAs carry a penalty, but in many cases relief provisions will allow withdrawals to be made without penalty. If the retirement fund is a tax-advantaged account though, income tax on the amount withdrawn will still apply, although repayment or income-spreading options may be available.
Earned income lookback. If your current income has dropped due to the disaster, you may be allowed to use the prior year’s income to qualify for the Earned Income Tax Credit or Child Tax credit.
Tax-free reimbursements. Insurance proceeds and FEMA aid are generally not taxable. Reimbursements may however, affect the amount you may declare as a casualty loss.
State-level relief. Individual states may offer additional tax relief, such as property tax abatements or additional tax deductions.
Effects of new disaster legislation
Bipartisan legislation passed in 2025 – the Filing Relief for Natural Disasters Act – authorizes the IRS to extend federal tax filing deadlines for individuals living in state-declared disaster zones, even before a federal disaster is declared. Prior to this legislation, relief was triggered only by a federal disaster declaration, which often came weeks or months after the event.
Stay informed
Quicker access to tax relief will help those affected by disasters to plan more effectively, and most importantly, to know with certainty that relief is forthcoming. The IRS’s Tax Relief in Disaster Situations page offers up-to-date information on the most recent tax relief provisions for taxpayers affected by natural disasters.
If you do suffer a loss, be sure to document everything with photos and receipts for repairs so that you can claim a casualty loss tax deduction.